Paying Seller AFTER Renovation?

[Vonetta Booker]

Has anyone ever worked a deal out with a seller in which you'd renovate their house first, list it fully rehabbed--and then pay them their asking price out of the ARV?

The strategy was mentioned in the book I'm currently reading, "The Book On Negotiating Real Estate" by J. Scott, Mark Ferguson & Carol Scott. It sounds like a great addition to one's creative strategies arsenal--but there are a couple of things I'm still trying to figure out. For example, I'm assuming that one would take out a loan for the rehab (probably via a private lender, since a HML will want 1st lien?)--let's say the repairs cost $50k. The seller wants $100k, and the ARV is $200k. This would mean that after paying back the $50k rehab loan + $100k to the seller, that'll leave me w/ a $50k profit, yes?

For anyone who's ever done this, what deal/contract did you negotiate w/ the seller?  Did you give them a deposit to seal the deal?  How to ensure that the seller won't reneg on the deal after the renovations are done?  And what's to be done in the event the house doesn't sell? 

Like I said, it sounds like a great strategy for the right situation--I just want to make sure I understand it fully.  Thanks! ;-)