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
What Are The Best Domains To Buy?

Right at the top of the to-do list for any new business is “launch with a great brand name”. You’ll also need a website domain name to match – which is where NameExperts.com Director Joe Uddeme can help. Find out how to choose and register a great URL for your business in this guide.   For more than 15 years, NameExperts.com has been helping brands buy premium domain names that will help them grow. The issue most new firms have today is that pretty much every great domain name they can think of has gone. But that doesn’t necessarily mean they aren’t available. As well as advising fledgling companies on which great brand names to choose, we spend much of our time tracking down domain name owners and reaching out to them on behalf of our clients. It’s what domain brokers do – we’re your secret weapon when trying to get a great name owned by someone else (and not paying over the odds for it). In this post, we’ve rounded up 10 of our best tips for anyone who wants to buy a domain name for their business. And if you get stuck, just reach out to us for some expert help.   What are the best domain names to buy? Stick with the classics! Though it might be tempting to use options like .net, .edu, .biz or even things such as .shop, or .blog, it’s usually better to go with a .com domain name whenever possible. That’s mainly because everyone is familiar with .com. No matter how good the domain name you’ve landed, they won’t remember the all-important last bit (known as the top-level domain or TLD) if it’s something obscure. Everyone will automatically assume your domain is a dot com – so you might as well give your customers what they are expecting. Additionally, the .com name is worth more. Search engines cater to sites that give the user the best experience, and .com sites are seen as more credible to users and help establish brand authority.   Choose a brandable name If you’re just getting started with establishing your brand, choose something brandable. Think about something unique that your competition won’t have. A brandable name might mean that your name doesn’t mean anything at all, as is the case with Etsy or YouTube. You also want your domain to be easy to remember and easy to pronounce. Something else you’ll want to consider is to not choose something that sounds shady or untrustworthy. The goal is to create something that can be developed over time, so choosing the right name is important.     Keep it short and simple If you’re trying to add keywords (terms people will tap into Google when searching for a business like yours) to your domain name, make sure you don’t go overboard. It’s better to have something short and simple that accurately represents your brand. We recommend keeping your domain under 15 characters and avoid using numbers – unless they are specifically a part of your brand. Try to avoid weird or unique spellings of common words. If your name is Smyth and you want to include that in your brand, odds are that every single person will type Smith. Alternatively, if you’re dead set on using your unique brand that might be a variation of a common word or name, you can work with us to buy the domains that include the common misspellings. That way, even if users type it in wrong, it will redirect to your website.   Avoid double letters and hyphens Another tip we would suggest is to avoid double letters or hyphens in your domain. It makes your domain much more complicated. For example, if your website is classset.com, you will probably lose traffic because of typos. Avoiding double or triple letters like this will keep it simple and easier to type and remember. Additionally, always avoid hyphens. Hyphens are typically associated with spam websites, and you don’t want your business or blog to be tainted off the bat. Plus no one will remember the hyphen! If the reason you’re using a hyphen in your name is that a competitor has the domain you want, chances are you’ll be sending clients right to them. So, find a different and unique name. If you’re having trouble, contact us. We love helping clients find the very best domain for their business – and at the right price, too.   Don’t limit yourself with a domain that is too specific Choosing a name related to the industry you’re in is a smart choice because you automatically give users an idea of what your website is about. However, you don’t want to limit yourself and not give your brand the opportunity to expand. If you’re a baker, you might consider the name frostedcupcakes.com – but what if you wanted to include more than just cupcakes in your bakery? Your domain might dissuade users from exploring what other services you offer because they have a preconceived idea of what you do. Try to pick something flexible that can grow with you. Research the history of your domain before you buy This is where an expert domain name broker can really add value. We research your domain to find out who owns it, and then we spend time finding out what the reputation of that domain is. Why? Because sometimes even an “amazing” domain just isn’t worth it. If your desired name is tainted because it’s associated with spam or an inappropriate site, it might be worth looking at another domain name. Keeping that in mind, you don’t want to choose an alternative name that’s too similar to the one you’ve just abandoned because of its bad reputation. You never want your name associated with anything untrustworthy.   Domain names are like real estate Every day, new domains are registered globally. If you find a domain name you want, don’t wait too long! We’ve often described domain names as being similar to real estate. People all over are looking for good brandable names that they can register and then try to sell at better rates later. If you don’t act fast (or consult an expert like us), someone else might go ahead and register your domain name before you do. That being said, not all domain names are worth as much as you might think (or their sellers would have you believe). So don’t just buy domain names just to have them – buy names you actually think you might use in the future. If a name you want is in use, think laterally. Website copywriter Mike Peake, who sometimes helps out on the NameExperts website, had to do this when he tried to register mikepeake.com many years ago, only to discover it was already registered. Rather than choose a .co.uk TLD (he’s a Brit), he went with bymikepeake.com instead.   Make sure you’re set to auto-renew Typically when registering a domain name, you get to choose the registration period – usually a time span between 12-24 months. If you don’t renew your domain after that time, you will miss your window and it will become available to the public to buy. Sometimes, if you fail to renew in the time allotted, brokers and other domain purchasing sites will buy your recently expired domain and then charge you an arm and a leg to get it back. Avoid all that nonsense by setting your payment to auto-renew! Nearly every registrar gives you the option, so better be safe than sorry.   Don’t worry if your domain is taken Honestly – that’s what domain brokers are for! We are in the business of buying domains on your behalf, even if they are already taken. We have a tried and true process that really works. Our service includes a pre-consultation phase, followed by a more detailed consultation and then in-depth research. After that, we contact the seller for you and negotiate the price. We take all the hassle out of the process and make sure your domain gets transferred to you. What are the best domains to buy? It’s all down to you and what you want your brand to represent. But don’t panic if your dream name doesn’t appear to be available. We can work wonders with our ‘little black book’ and negotiation skills – or we can steer you in an exciting new direction if that’s a better route. The goal in both cases is to help you secure the best domain name that works for you.   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. Contact us at: [email protected]  

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]

Image of the second nature website
How We Helped Air Filtration Specialists Second Nature to Rebrand With a Premium Domain Name

When a business is stuck with a legacy name that no longer works, rebranding is often the only solution. But securing the domain name that goes with your new moniker is rarely easy – unless you have a premium domain name broker on your side.   You may have heard of Second Nature, an air filtration subscription business based in Raleigh, North Carolina. Second Nature sells high-quality home air filters on a subscription basis, letting people access clean air conveniently. However, the company didn’t start with its current name. It was previously known as FilterEasy before rebranding in 2019. Rebranding from FilterEasy to Second Nature reflected the company’s decision to become an all-encompassing “home wellness” brand instead of limiting itself just to filters. It was a sound decision that made the company more attractive to customers and investors. FilterEasy was a referral from one of our trusted partners to help identify the owner and secure the SecondNature.com domain name. They were budget-conscious and looked for a way to buy the domain name without investing all the capital on day one. They were looking for a domain broker or consultant that could help assign value to the asset, and also protect the anonymity of the FilterEasy team. Second Nature is an ideal case study of how proper rebranding can boost a company’s fortunes. It’s something you can draw a lot of lessons from.   Starting out – new insight about air filters FilterEasy began in 2012 as the brainchild of two students from the North Carolina State University (NCSU). Kevin Barry and Thad Tarkington sought to help people access residential air filters conveniently. Their idea was to sell home air filters on a recurring subscription basis so that customers could change them regularly. Often, homeowners buy air filters and forget to change them at the recommended time. An unchanged air filter usually clogs up, and debris passes through, causing adverse effects. Hence, subscriptions represented an excellent reminder for customers to change their filters. FilterEasy passed through a local startup accelerator program and launched out of beta in 2014. It began by offering air filters in over three dozen sizes. Barely a year after its launch, it had amassed 10,000+ subscribers and grossed $1 million in annual recurring revenue, representing major success.

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?