I would like to find out what steps do people take when doing a freelance job over the net with someone you have never met to make sure that they get paid in the end when they deliver the end product?
The following is what I normally do:
Are there any escrow services for these kind of transactions?
Always enforce a contract. That's the only way you're going ot have legal backing in case of any issues.
Without a contract, you have nothing you can enforce. Trying to use other tactics like an escrow account, etc. is just going to prove to be more of a headache than it's worth. If people want to rip you off, they will...no matter how many goofy tactics you attempt to use.
They can't get around the law in the end.
If you're billing by the hour, let them now you'll stop working until you receive payment every 2 weeks.
If you bid for a project, ask for 50% payment in advance.
What will do you in a situation where source code is requested?
I hate to admit it by sites like guru.com or elance.com are invaluable when it comes to transactions. They provide an escrow so you know the individual is good for the amount and they know you can't access it till they approve of the work. But don't let that scare you, there are mediation services available if there is a disagreement. The best way to settle these sorts of bumps is to ensure you've written a strong contract and set of requirements.
Both of those websites, and others like them, provide you with all the tools you need to advertise, find projects, write proposals, and write requirements, etc. With each project you follow a path that suggests things for you to do or at times even requires them.
The catch? There are basic accounts and paid accounts, usually paid accounts get a greater number of bids and visibility and pay a smaller percentage per project. And yes, you will pay a fee to use the services but it can be reasonable and it just ease the burden quite a bit.
Rigorously document scope creep.
Scope creep is every project's worst enemy. Take steps to ensure that both you and the client know that making this small change and that small change is out of the scope of the original design and it will impact the hours required for the project. Having documentation of all occurrences of scope creep will keep both of you safe.
Not meaning to blatantly advertise, but I've done some freelance work on a site called RentACoder which provides escrow services and provides great protection for both buyers and sellers. Of course they take quite a cut for themselves.
There are certainly other such services available for freelance developer, or those looking for their services.
I follow 2 simple steps on every web project that I do. They have not failed me yet:
I create a staging site on a personal server that my clients don't have access to. I let them preview their website at every milestone. Once they approve a milestone as being complete, I send them an invoice. As soon as I receive payment, I check-in the code to a shared SVN repository and update the copy on the client's server.
I always document all expectations, requirements, agreements, basic storyboards, milestones, etc. and send it to them prior to beginning the project. It serves both as a contract as well as a proposal.
I always make my process very clear in order to minimize any surprises. Most clients are quite happy working this way because the process gives them a lot of control. But it's mostly a guise to ensure you get paid in a timely fashion.