What is Domain Name Escrow & How Does it Work?

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JoeUddeme

JoeUddeme

What is Domain Name Escrow & How Does it Work?

Escrow is an important thing to pay attention to when buying domain names, especially those of high value. This article will explain how domain name escrow works and the necessity of using a domain escrow 3rd-party during a domain name transaction when making highly-priced acquisitions.

What is Domain Name Escrow?

Domain name escrow is a specialized service designed to protect both buyers and sellers during domain name transactions.

In this process, a neutral third-party agent holds the payment and domain information until all conditions of the transaction are met.

This setup ensures that the buyer receives the domain name and the seller gets their payment, significantly reducing the risk of fraud and deception.

By using domain name escrow services, both parties can enjoy a secure and efficient transfer of domain ownership, providing peace of mind throughout the transaction.

What Is Escrow?

Escrow is an arrangement in which a neutral third party temporarily holds money meant for a purchase until specific conditions are met. The money will only be transferred to the intended recipient when the conditions are met.

If the conditions are not fulfilled, the money will go back to the buyer. In domain name and other transactions often, the escrow process involves a lawyer managing legal documents, ensuring compliance with laws, and securely holding the assets and money in a trust account until the terms of the agreement are fulfilled.

What Can Escrow Be Used For & Why

Escrow is common in transactions where a significant amount of money is involved, e.g., real estate. It is necessary to protect the buyer from losing money in case the seller does not fulfill the terms of the deal.

Domain transactions can be pricey, which makes escrow and other services necessary just like with real estate. After all, domain names are online real estate. Escrow protects against:

  • Sellers refusing to deliver a domain despite agreeing to do so.
  • Buyers refusing to pay for a domain despite an agreement to buy it.
  • Payment being made, and the domain not being transferred to the buyer.

Secure payment is crucial in domain name transactions, and escrow services ensure that the financial exchange is safe and protected.

In short, escrow ensures that both parties in a deal stick to their agreed terms. It is a mediator of the transaction and refuses to complete it until both parties act in good faith.

How Does Escrow Work?

1. Agreement on price and deal

The buyer and the seller negotiate and agree on how much is to be paid for a domain name or group of domain names. They also negotiate important factors like the date of payment, method of payment, and what currency to use.

2. Buyer places agreement with an escrow company

With the deal terms drawn out, the buyer finds an escrow provider and deposits the payment with an escrow agent. Once the payment goes through, the buyer pays escrow company will notify the seller and tell them to transfer ownership of the domain name related to the escrow transaction.

3. Domain Name Is Transferred

The seller will transfer the domain name to the buyer. The wire transfer procedure varies depending on the domain registrar, but both parties will work together to ensure a smooth transfer.

It is crucial to involve legal counsel in domain transfers to secure the transaction and ensure compliance with legal requirements.

4. Domain Transfer Is Confirmed

After the domain is transferred, the buyer will notify the seller agree the escrow company that the seller has fulfilled their part of the deal.

5. Payment Given To Seller

With the domain transfer confirmed, the escrow company completes the escrow transaction by using money order and sending the money deposited by the buyer to the seller.

What fees are associated with using an escrow service?

The escrow usually charges a commission on the value of the deal. Some may also charge a flat fee in addition to a commission. The exact commission may vary depending on the deal volume.

Benefits of Using Escrow For Buyers and Sellers

The benefits of using escrow for domain names include:

  • Security: The escrow holds the money until all deal terms are fulfilled, so there are little chances of the buyer losing their money without getting the intended domain name. The buyer also feels more secure dealing with a trusted escrow company than with a stranger over the web. Additionally, escrow services safeguard domain transactions by holding funds and domain holder information, minimizing the risk of fraud.
  • Assurance: The buyer is assured that they will get the domain they want, and the seller is assured of payment once the domain transfer is confirmed.
  • Customer support: Escrow services usually offer customer support and can guide the buyer throughout the process of acquiring a domain name.

Choosing the Right Escrow Services

Selecting the right 3rd-party escrow provider for domain name transactions is crucial for a smooth and secure process. Start by looking for a reputable and licensed escrow company with a proven track record in handling domain name transactions.

Evaluate their fees and payment terms to ensure they fit within your budget. Additionally, consider the quality of their customer service and support, as this can be invaluable if any issues arise during the transaction.

A reliable escrow provider should offer a secure and transparent process to deposit funds, with clear contractual obligations and a well-defined escrow agreement. Research the company’s reputation online and read reviews from previous clients to ensure you are working with a trustworthy escrow company.

Domain Name Transfer and Intellectual Property

Transferring ownership of a domain name involves several steps and can be particularly complex when intellectual property rights are involved. A domain name can be considered intellectual property if it is trademarked, which can impact its value and transferability.

Before proceeding with a domain name transfer, it is essential to conduct a clearance search to ensure the domain name does not infringe on any existing trademarks.

Utilizing a domain name escrow provider can facilitate this process by ensuring that both parties fulfill their contractual obligations and that the domain name is transferred securely.

This helps protect best interests of the buyer and the seller, ensuring a smooth and legally compliant transfer of the domain name.

Alternatives To Using Escrow

Attorney

A licensed attorney can draft a sales contract that is legally binding for buyer and seller. If any party breaks the contract, they can be sued for damages in court.

The attorney can also act as an escrow organization and only transfer money from the buyer to the seller if the terms of the contract are fulfilled.

An attorney is crucial in selling domain names to ensure all legal aspects are covered and the transaction is secure.

Domain marketplace

There are many marketplaces where you can acquire domain names. Here, the marketplace acts as a custodian of the domain and only the seller transfers it to the buyer after payment is confirmed, which is then given to the seller.

Best Domain Name Escrow Services

Escrow.com

Escrow.com is the world’s largest online escrow service, and it has specific features for domain sales. The buyer can initiate the escrow request and provide the seller’s contact information for Escrow.com to get in touch.

The buyer transfers the agreed sum to Escrow.com, and it is only when they confirm the domain has been successfully transferred that Escrow.com will disburse the money to the seller.

Escrow.com charges 3.25% for deals between $0 and $5,000; 0.89% for deals between $5,001 and $25,000; and $162.5 + 0.25% for deals over $25,001.

Sedo Domain Transfer Service

Sedo is a popular domain name and website marketplace, especially useful for those looking to buy or sell domain names.

Its domain transfer service puts it as a middleman between the buyer and the seller. Sedo receives the payment from the buyer and the domain name from the seller.

When both ends are confirmed, then Sedo transfers the domain to the buyer and the buyer sends the money to the seller.

This service incurs a 3% fee on the domain purchase price, with a minimum of $60.

Afternic

Afternic is another popular domain name marketplace focused on high-value domains. It offers an escrow service to protect both the buyer and the seller.

Afternic holds the agreed amount and only disburses it to the former owner or seller when the buyer has confirmed receipt of the domain. If either party breaks the deal terms, the sale will be canceled and the money given back to the buyer minus the escrow fee.

The drawback here is that Afternic doesn’t charge escrow fees separately. It takes a 20% fee which includes both sales and escrow commissions on all domains listed on its platform.

Using an Escrow Service

It is necessary to use an escrow service if you are paying a significant amount for a domain name and it helps protect you and the seller. If you need guidance in the domain buying process, including escrow, contact us for help.

We have negotiated over $125 million in domain name sales and have over a decade of experience in domain name buying and transfers.

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Other TLDs: If your website is hosted on a .com domain but your email use different domain extensions (e.g., [email protected]), it can lead to confusion and undermine the consistency of your brand. Clients may accidentally send emails to [email protected] because they assume your email matches your website domain. Credibility with Investors and Partners Perception of Success: Having a .com domain is often seen as a sign that a brand is more established, successful, and serious about its online presence. Investors, acquisition partners, and other account stakeholders may view your brand more favorably if it has secured a .com domain, especially if you’re targeting a global audience, or providing services or support. Domain as a Digital Asset: A .com domain purchase can also become a valuable long-term equity play. Premium .com domains tend to appreciate over time, adding value to your organization if you decide to sell or expand services to maximize the best price for transfer. Register top keywords that identify with your services or product offerings or answer questions. Purchase a .org for your non-profit, or a .net for your network platform. Alternative TLDs such as .net and .org may each hold value to the domain name owner and may be attractive to the buyer as an cheaper alternative based on availability of domains. SEO and Search Engine Benefits Higher Click-Through Rates (CTR): A .com domain will ensure greater click-value in search engine results. Since users trust .com websites more, search engines like Google may favor them in search rankings, especially for advanced searches. Even if a domain extension doesn’t directly impact SEO, user buy behavior (like click-through rates) does, and .com domains tend to perform better in this area. Backlink Value: When other sites link to you, they may be more willing to link to a .com site due to its perceived authority and security. High-quality back links are essential for SEO performance, and .com domains tend to naturally attract more of those links according to search tools. International Appeal Global Acceptance: If your org operates globally or plans to expand internationally, a .com domain is universally recognized and accepted across borders and everyday life. Country-specific domains (like .co.uk or .de) can limit your reach or cause confusion in markets outside that specific country. They can also cause transfer issues. Consistency in Branding: As your organization grows, maintaining a consistent identity across different regions is essential. A .com domain helps establish a unified web presence, making it easier for customers worldwide to find and recognize your branding and url. Competitive Advantage Competitor Safeguard: Owning the .com version of your entity name prevents competitors from using it. Even if you currently use a different extension for your account, a competitor could purchase the .com and use it to divert traffic, confuse clients, or dilute your message or image and hurt security. Professionalism: Many well-established businesses, particularly in competitive industries, prefer .com domains. If a competitor has the .com version of a similar name, they may be seen as more professional or legitimate than a business name using a less common extension. Having a .com gives you an edge in appearing professional and trustworthy. Versatility to Ensure Growth Future-Proof: As your network grows, the .com extension is flexible enough to accommodate expansions into new products, services, or geographic markets. Unlike some niche TLDs, which may be associated with specific industries (like .tech or .store), a .com can grow with your entity and remain relevant in any market. 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Here are a list of some top extensions and how they’re often used: .ai: artificial intelligence, machine learning support, reasonable renewal cost .net: internet infrastructure sites, more technical, fairly reasonable renewal cost .co: abbreviation for commerce, corporation and community .org: non-commercial org and non-profits .io: tech sites, business or commercial use support You definitely don’t need to use a website builder for every domain name. Make sure you forward any additional domain names you register to your primary site and add a secure server to protect your organization. The Dot-Com Domain Should Be Your First Choice When we talk about long term investing and ROI, we think about the stock market, commercial or residential real estate investing, gold bullion and Forex and certainly domain investing. Domain names hold value and add instant equity to the branding strategy and ownership in the purchase and sale of domains names. There are hundreds of thousands of prime opportunities to invest in the domain space and as the last 30 years have shown, the .com is the most credible TLD on the market, both domestically and abroad. This holds true if you are buying your domain for your business or to hold and transfer at a later date. Whether this is your first domain, or you own many domains, the .com creates easy accessibility for consumers and brands alike. Brand Protection: Companies work hard to protect their domain brands, account and marketing tactics. They invest millions of dollars and countless resources at building that beach front real estate and maintaining their Internet presence in the world. As experts in the domain space, we continue to recommend the .com as the superior domain with considerable upside and long term equity potential. Case Study: Tesla.com domain acquisition Here’s a case study of a .com domain acquisition transfer that highlights the importance and benefits of acquiring a premium .com domain for a business. The study involves Tesla’s acquisition of Tesla.com. Case Study: Tesla’s Acquisition of Tesla.com Background: For many years after its founding, Tesla (the electric vehicle manufacturer) operated under the registered domain TeslaMotors.com. Despite its growing success, the entity didn’t own the highly sought-after Tesla.com domain. TeslaMotors.com was functional, but having Tesla.com would better align with the company’s image as it expanded beyond cars to include energy products like solar panels and batteries. The domain Tesla.com was originally owned by a man named Stuart Grossman, who had registered it long before the organization existed. Grossman wasn’t actively using the domain, but he also wasn’t interested in selling it easily, making the acquisition a challenging and lengthy process. The Acquisition Process: Need for Rebranding: As Tesla grew and became a household name, the organization realized that TeslaMotors.com was limiting its branding. The “Motors” in the domain name suggested a narrow focus on cars, whereas Tesla’s long-term vision encompassed energy solutions, solar products, and batteries. The organization needed a simpler, cleaner domain—Tesla.com—that reflected its image as a leader in the broader tech and energy sectors. Complex Negotiation: Elon Musk, Tesla’s CEO, revealed that acquiring Tesla.com was a difficult process, taking over 10 years of negotiations. The domain owner, Grossman, was reluctant to sell the name for many years, leading Tesla to offer a significant amount to finally secure it. Musk later hinted that they had paid $11 million to acquire the domain, though exact figures weren’t officially disclosed. Hands-on Approach: Tesla’s approach to acquiring the domain involved: Patience: Tesla waited until the domain owner was ready to sell, all while continuing to build their company. Persistence: Tesla remained in contact with the owner over a long period, signaling ongoing interest and ensuring the owner knew they were serious buyers. Strategic Timing: Tesla finally closed the deal when they were ready to reposition their entity from just a car line to a broader energy and technology company. Outcome: In 2016, Tesla successfully acquired and completed the transfer of the Tesla.com domain and immediately rebranded their website and digital assets. This acquisition allowed Tesla to secure its concept and image across all its product lines and simplify its online presence and customer support tools.

Why Work with Name Experts

Name Experts offers personalized domain brokerage services, assisting clients in buying or selling premium domain names with expert appraisal, negotiation, and complete transaction management while ensuring confidentiality.

Some of our most
successful stealth acquisition and sales

Aid.com

Fit.com

Mine.com

GLD.com

Jeff.com

Fora.com

Nori.com

Secure.com

Guitar.com

F*ck.com

Radian.com

MetaData.com

Prize.com

Link.com

Loop.com

Programs.com

Claim.com

Quince.com

Hook.com

QXO.com

NQ.com

Rest.com

Humani.com

Max.com

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