The seller will know that it's funded before signing, which should suffice. However, either the buyer or the seller could intentionally give a faulty privkey, which could result in funds staying in limbo forever. I'm sure there is a better way of doing this, but I'll have to think about it.

I don't think you need to pay with legal tender, or even pay at all, to switch ownership. One can do whatever they want with their property, and if the seller doesn't appear like she's evading taxes, I don't think anyone will care.