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The seller shipped the gun to my local FFL along with a self-addressed stamped envelope. I went to the FFL with a USPS money order for the total amount, which I gave to him to send out in today's mail in the seller's SASE.
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That sounds very odd, and not something I would personally agree to. I would never relinquish possession of a gun without being paid first. I have sold one gun on another forum and was paid first.
I have never heard of someone agreeing to what you describe.
There is also nothing fishy about wanting to have money in hand before giving up the gun, like anything else. Once you give up the gun, you have lost any control over the situation and there are too many things that could go wrong.
I have done a few of these deals here and there, two in this forum. The members here were both around for a long enough time and had enough posting history for me to feel comfortable.