November 11, 2024

What is Domain Name Escrow & How Does it Work?

written by

Joe Uddeme

Joe Uddeme

What is Domain Name Escrow & How Does it Work?

Escrow is important when buying domain names, especially those of high value. Domain name expert Joe Uddeme explains how domain name escrow works – and why you should use a domain escrow 3rd-party 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. A domain name consulting service can help make the process much easier.

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, the escrow process often 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.

A large vault door denoting the importance of secure transactions during the purchase of a premium domain name

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 – but 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 and agree with 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 a 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.

Printing press roll of US dollar bills for article about domain name escrow services

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, 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 $150 million in domain name sales and have over a decade of experience in domain name buying and transfers.

 

About the author

Joe Uddeme is Director and Principal of NameExperts.com, one of the world’s leading domain name brokerage services. He has overseen domain name sales and acquisitions totaling more than $150 million and is renowned worldwide as a go-to expert in buying and selling premium domains. Contact us at: [email protected]

Subscribe for More Domain Buying & Selling Advice

Related posts

Image looking over a person's shoulder to indicate anonymity when securing a domain name
Domain Privacy and Protection: How and Why to Hide WHOIS Information

If you don’t tread carefully, anyone in the world can find out who bought the web address you just snapped up. Domain name expert Joe Uddeme shares his top tips for staying out of the limelight.   In the rush of excitement that comes with securing a name – especially a desirable, premium domain name you’ve been after – it’s easy to overlook one of the most basic elements of name registration: shielding your identity. Millions of people before you have forgotten to do it – precisely because it is so easy to overlook. Or perhaps you spotted the option to stay anonymous but didn’t quite understand what it meant – or felt it wasn’t worth the cost. Here’s how to stay out of the WHOIS database when buying a domain name – and why you might want to. Key takeaways: Understanding your Domain Privacy options Discover which countries keep your name secret by default The benefits of keeping your information private How to ensure your name stays out of the picture Discover Domain Privacy FAQs   What Is Domain Privacy? Domain privacy is a service domain registrars offer customers to hide their information from the public WHOIS database. Customers pay for privacy from their registrar, which replaces their contact information in the WHOIS database with a forwarding address.   What Does Domain Privacy and Protection Do? It removes a domain owner’s information from the public WHOIS database and preserves their privacy. The WHOIS database is a vast database operated by the Internet Corporation for Assigned Names and Numbers (ICANN). ICANN is the agency that oversees domain names, and every individual or company that buys a domain name must provide their contact information to this agency. ICANN, in turn, lists all contact information in a public database called WHOIS. Anyone can search the WHOIS database to get the contact information of a domain’s owner. Many owners are uncomfortable with their contact information being listed publicly, so they pay their domain registrars for domain privacy and protection. The registrar replaces the customer’s contact information with a forwarding or proxy address on the WHOIS database, so people can’t look up the real contact details.   Do I Need Domain Privacy? You need to pay for privacy protection if you’re uncomfortable with your email address or phone number being posted online. Many spammers and telemarketers scour the WHOIS database for the contact information of domain owners to sell them products. Domain name privacy protection prevents this from happening. People residing within the European Union (EU) don’t need to pay for domain privacy because they get it by default. On 25 May 2018, the EU passed the General Data Protection Regulation (GDPR) ruling. This ruling mandated companies serving EU residents to give customers control over their data. EU customers were granted strict data privacy under this law, so domain registrars began hiding their information from the WHOIS database by default. Many other countries have passed laws similar to GDPR, such as Turkey, South Korea, Argentina, and Brazil. The United Kingdom (UK), a former EU member, also passed a similar law. You may not need to purchase a domain name private registration if you reside in these countries. However, customers in other countries need domain privacy and protection to hide their contact information.   How Important Is Domain Protection? It is important because it lets you hide your contact information from the public view. Without this protection, your personal information will be available to anyone who wishes to find it, and malicious actors may take advantage of this freedom to target you with cyberattacks and domain name scams.   Benefits Of Privacy Protection 1. Protects Personal Information Buying privacy protection when registering a domain removes your personal information from the public eye. People won’t be able to find your contact information by looking up your domain name on the WHOIS database. Instead, they’ll see the contact information of your domain registrar, which they can’t trace back to you. 2. Minimizes and Prevents Spam Spam is the biggest problem on the internet. It refers to any irrelevant and solicited message sent over the internet, usually to advertise products or steal information via phishing. Spammers search every possible medium to harvest emails and phone numbers, including the WHOIS database. Domain protection hides your details from this database so spammers can not target you with unsolicited messages. 3. Anonymity Many people are uncomfortable with their personal information being on the internet for whatever reason. Domain privacy and protection grants you anonymity even when you control many domain names. 4. Prevents Competitive Data Mining Businesses often mine public databases for information about their competitors. For example, if you run a popular blog anonymously, rival blogs may want to discover your identity and research potentially damaging information about you. Domain privacy and protection ensures that competitors can’t trace your identity through your domain name. 5. Prevents Domain Theft Hackers often target owners of valuable domain names with phishing messages to steal their registrar login details. They do this by sending a link to a website that looks exactly like your domain registrar’s page but is actually a different web address. The end game is to log into the owner’s registrar with the stolen details and transfer their domain name to another account. Purchasing domain privacy means that hackers won’t find your contact information in the first place. You can hold onto your valuable domain names without fear of being targeted by sophisticated cybercriminals. (Check out our post about what to do if you lose your domain name). How To Get Domain Privacy And Protection When Buying a Domain Most registrars display the option to add privacy protection to your cart when you choose to buy a domain name. It’s an effective method of upselling because they know many customers want privacy. Look for “hide WHOIS information,” “domain privacy,” “domain protection,” or a similar phrase on the domain registration box and select it. Head to the checkout page and pay for the registration, privacy protection, and any other item you selected. After paying, you’ll automatically have WHOIS protection for your new domain. Add To An Existing Domain You can always buy privacy protection for a domain name you already own. Follow these steps; Log into your domain registrar account. Head to the domain management section. Click on the specific domain name you need privacy for. Open the Security tab, and you’ll likely find a button that prompts you to buy WHOIS protection. Click on the button and proceed to your checkout page to pay. Wait for some time after the payment confirmation for your registrar to update the WHOIS database information. There are dozens of domain registrars, and the steps to add privacy protection to an existing domain are similar to what we explained above for each of them.   FAQs on Domain Privacy Should I add privacy protection when buying and selling domains? Yes, you should add the option to hide domain registration info because it has many benefits. It prevents spam, competitive data mining, and potential domain theft. It also guarantees anonymity on the WHOIS database, which is desirable for privacy-conscious customers. If you are working with multiple domain names, especially high-value ones, an experienced domain consultant can ensure all of this is taken care of on your behalf. How Do You Buy A Domain With Privacy Protection You’ll usually see an option to buy privacy protection on the page where you search for an available domain. Add the privacy protection item to your cart alongside the domain name and pay, and you have successfully acquired privacy protection for your new domain. Is privacy protection available on all domains? It’s available for most domains, but there are some exceptions due to government rules. These include .US., .CA, and .FR, among others. Is there a cost to domain privacy and protection? Most registrars charge between $10 and $20 annually for privacy protection while registering a domain. However, a few offer it for free, e.g., NameCheap.   About the author Joe Uddeme is Director and Principal of Name Experts, one of the world’s leading domain name brokerage services. He has overseen domain name sales and acquisitions totaling more than $150 million and is renowned worldwide as a go-to expert in buying and selling premium domains. Need help? Contact us at: [email protected]

Man and woman in casual setting look at a laptop, as if investigating best places to buy a premium domain name
Best Places To Find a Premium Domain for Sale

A great domain name usually has a price tag to match – it’s why we call them ‘premium’ domains. In this post, domain name expert Joe Uddeme explains where to find high-value names that can help your business grow.   Premium domains are the best type of domains because they are memorable and tend to draw a lot of organic traffic. They are short, catchy, and quickly feel familiar – with a high potential to become popular web addresses. They also present great branding opportunities for up-and-coming businesses. The best places to find premium domains for your business include: Name Experts GoDaddy Sedo Network Solutions Domain.com Namecheap In this post, we’ll look at each of these and discuss their pros and cons. Key Takeaways: The steps to take when buying a premium domain Brokers and marketplaces for premium domain names Discover some FAQs about premium domain names

A man and a woman in office worker attire sit side-by-side looking at a computer screen (unseen) to denote a conversation about what happens about buying a domain name
What To Do After Buying a Domain Name

Congratulations! You bought a domain name. But now what? In this post, domain name expert Joe Uddeme explains what to do next to keep your domain name protected – and extract its full value.   “I have a domain name. Now what?” – this is a very common question people ask. The fact is, a domain name is pointless if you don’t do anything with it! After buying a domain, many things will run through your mind, and choosing how to use it productively can be confusing. However, don’t fret. This article will guide you on what to do after purchasing a domain name. Do it right, and you can leverage your domain name and build it into an attractive asset. Do it wrong, and you’ll waste 20 bucks on the temporary ownership of something you can’t even touch.   Key takeaways: What is web hosting and why do you need it? Building a website and a brand you can leverage Attracting online customers to your new business Planning your exit strategy Before we proceed, let’s run through how to buy a domain in the first place.   Acquiring Your Domain Buying a domain has become more simple than ever. In 2025, it’s just a few clicks and a swift online transaction. The first step is to choose a domain name you like that is relevant to your business. Afterwards, you can check if it’s available to buy immediately. Find a domain registrar accredited by the Internet Corporation for Assigned Names and Numbers (ICANN), the organization overseeing all domain names on the Internet. If the domain name is available, you can purchase it immediately from an accredited registrar. The price depends on how high the demand for the domain name is. If the domain name has already been claimed, you need a different approach. You can check domain marketplaces to see if the owner has possibly listed the domain for sale (see our list of the best domain marketplaces). Otherwise, you can possibly contact the owner to negotiate a deal. If this is out of your comfort zone and you have a high-value premium domain name in your sights, check out an experienced domain name broker with a great track record. For more details on securing a domain name, check our in-depth article about how to buy a domain name. What To Do After Buying A Domain Name You have acquired a domain name and have taken the first step in building your web presence. There are many other things to do after buying the domain, and we’ll outline them below. 1. Get Web Hosting Setup After buying a domain name, the first thing to consider is hosting a website with it. You’ll need a web hosting package from a reliable company. The company will host your website on its servers for a fee, and your website will be accessible once someone types your domain name into their web browser. Web hosting has become a walk in the park, at least in terms of getting started. You can get reliable web hosting for a few dollars monthly, and the price keeps going down as computing capacity increases around the globe. Sometimes, a domain registrar also offers web hosting services, meaning you can buy a domain name and a hosting package from the same platform. Otherwise, you can buy them separately and point your domain name to your hosting company’s servers. 2. Connect Your Domain to Your Hosting Connecting your domain to your hosting provider is relatively easy. You can do it via two methods: Changing the nameservers to those of your web hosting provider. Adding a DNS A record. Either method involves changing the domain name system (DNS) configurations from your domain registrar. Your registrar allows you to directly change the nameservers from its default to the one provided by your hosting company. You can also point your domain to the hosting company’s nameservers by adding a DNS A record. It’s the same action but with two different approaches. 3. Create an Email Address with Your New Domain Instead of using a common email address ending with “Gmail.com,” “Yahoo.com,” or “AOL.com,” you can use one ending with your custom domain name. It makes you look more professional and shows people you’re serious about your business. Many domain registrars also offer email hosting, so you can pay for it and create custom emails directly. Otherwise, you can choose an external email provider and change your domain’s DNS MX records to point to its mail servers. 4. Build Your Website and Brand The best way to put a domain to work is to create a website with it. It can be any type of website, such as a blog or online store. Creating a website is usually complex, but there are ready-made tools that make the process as easy as it can get. You can use a designated website builder like WordPress, Wix, Weebly, Squarespace, etc. WordPress is the most common tool for building websites because of its versatility. You can use it to create virtually any type of website you want. Follow these steps: Install WordPress on your web hosting account (many hosting providers offer one-click WordPress installation). Afterwards, log into your WordPress dashboard to begin customizing your website.

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

Need help buying or selling premium domains?