These are just my opinions based on my experiences working with freelancers.
Avoid sites like Freelancer, Upwork, and especially Fiverr. (Again just my opinion.) Spammers will suck up your time like you won’t believe. Consider Unity Connect or Commercial: Job Seeking or Job Offering instead. They tend to strip the chaff and also connect you with people familiar with Unity’s art requirements and workflow. I primarily find artists based on their portfolios and other clients’ testimonials.
Start small, but big enough to make it worthwhile for a freelancer. This lets you build confidence in an artist while reducing your risk. A reasonable small task might be two 2D character spritesheets, or three concept art sketches, or a single 3D model. If it works out, you can hire the freelancer for more work. After you’ve established a good relationship, you can consider negotiating rates for bigger jobs. Put yourself in the freelancer’s shoes when negotiating rates; resentful artists don’t deliver quality work.
Accept that some jobs will be a complete loss. Odds are that this will be because the artist simply doesn’t deliver (or only strings you along with excuses) at the very beginning of the relationship. But it can even happen later on, for example if the artist has a major unexpected life change. You can reduce the loss by starting with small jobs, but it’s just an inevitable part of working with other people. When it happens, don’t overreact and let it distort your future interactions.
I’m not a lawyer, but you can usually be informal with legal agreements. Just get these things in writing:
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Licensing: for example, you retain exclusive ownership, but the artist is allowed to include the work in portfolios.
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Payment terms: for example, 25% at start, 25% after rough drafts are approved, balance on final delivery. Also specify who covers transaction fees incurred by whatever service you use (e.g., PayPal).
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Delivery schedule: concrete dates. Be willing to adjust a little, but don’t let the artist string you along either. Be as clear as you can with the deliverables. For example:
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March 1: Initial payment.
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March 7: Artist delivers rough sketches of X, Y, and Z (provide detailed specs).
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March 10: You provide feedback and second payment, with option to terminate job.
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March 17: Artist delivers first production drafts of X, Y, and Z.
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March 20: You provide feedback.
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March 27: Artist provides (watermarked?) deliverables of X, Y, and Z for approval.
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March 30: You approve, send final payment, and artist delivers. Or you request revisions.
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April 3: (If revisions required) Artist provides final deliverables. You pay.
Side note: If you get to see the art come together from the rough sketches, you’ll have more confidence that they’re original works and not plagiarized.
Finally, go with your gut. If something doesn’t feel right, walk away, even if you’ve already invested some funds. It’s better than turning it into a money pit.
Finally finally :), despite the negative warnings above, remember that artists, like you, are mainly in this for the love of game development. Generally speaking, your artist(s) want you to succeed. If any issues arise, it likely isn’t because they’re trying to screw you over, but because they misjudged the work or otherwise hit an unexpected hurdle. You’ll have to use your best judgment in each case to decide whether (and how) to work it out with them.