I just sold .25 bitcoin via cash by mail.
The buyer mailed me the cash via certified letter with signature delivery.
I used a multisig 2 of 3 transaction with a trusted member here as an arbitrator.

The multisig takes the risk of nonpayment out the system. When the cash shows up, I sign the multisig address to release the bitcoin.
If the guy doesen't mail the cash, the bitcoin does not leave the multisig address and the arbitrator is called in.
The arbitrator sees there is no proof of delivery and signs the bitcoin back to me.


Worked as smooth as butter (without the need for any arbitration).