What is Domain Name Escrow & How Does it Work?

written by

Joe Uddeme

Joe Uddeme

What is Domain Name Escrow & How Does it Work?

Domain Buying Guides

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 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.

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, 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.

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, 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 $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

Default alt text
What Is the GoDaddy Domain Broker Service, and Is it Worth It?

GoDaddy is the world’s largest domain registrar, with over 90 million domain names registered and counting. Thanks to never-ending marketing, the average person likely thinks of GoDaddy when they want to buy a new domain. It’s common for people to visit GoDaddy, type the domain they want to buy, and see that someone else has already taken it. But GoDaddy doesn’t leave the user hanging– it suggests an alternative domain name or advertises its domain broker service, as seen below:
Default alt text
Startup Domain Names : Buying the Right Domain Name

Having the right domain name for your startup sounds like common sense. However, it can be a challenging endeavor. Your organization name might not translate into a good domain name. Regardless of the challenges, it is absolutely essential that you have a fantastic domain name so that customers can find you, as well as help increase brand awareness. So how can you actually buy a good domain? Below are some suggestions that you’ll need to take into account while searching for that perfect name. Brainstorm Your Startup Domain Name When acquiring a domain, you need to start by doing some brainstorming.   What’s the name of your business? What services or products are you selling? What industry are you involved in? Develop five terms or phrases which can best answer those questions and can describe the domain name that you’d wish to acquire. For instance, if you wanted a domain name that involved “advertising,” you could use related terms like “online marketing,” “digital marketing,” “advertising,” or “sales marketing” as a starting point. While this may sound obvious, you also need to remember that your domain name ought to be related to your organization. For example, if your company name is Joe’s Electronics then you would want a domain name to reflect that name. If the website was called joesawesomewebsite.com, clients would not know that it was really an electronics site, which means you’re losing out on business because customers can’t find you. Keep Your Domain Name Brief, Unique and Easy to Remember While brainstorming domains you also wish to bear in mind that the shorter the better. Shorter domain names aren’t just easy to type, but also easier to remember. If you heard the domain from a friend or on the radio, would you be able to spell it correctly? In the end, settle on a domain that’s unique. The last thing that you need is for your domain to get confused with another site. This will also be certain that you won’t encounter any ownership issues. Research your Startup Domain Name Now that you’ve found a domain that fits your brand, you need to be 100 percent sure that it is available. One possible option would be to explore checkdomain.com, Domjax or copyright.gov. But that does not mean that you can’t find a domain name which is not similar. Just about all short. Com domain names are accepted. This means that they are likely to get premium cost to them if you are looking to purchase them. Check the whois information on the domain you are trying to buy. Add Modest Words Before or After Your Domain While you should keep away from pluralizing or hyphenating words since that will create confusion–and phrases such as “best” or “top,” there could be some minor alterations to make your domain stand out. Let’s say you have a car rental business located in Phoenix. You could search for a domain name that was on the line of phoenixrentals.com. Use Other Domain Extensions/Endings Ideally, you would like to secure a. com domain. It’s the best option for branding and type-in-traffic, also being ideal for any site. However, there are other endings or extensions that could benefit your brand as well. Take the .info extension for example. It could be an alternative if you are running an informational site. Another choice is to localize your own domain. If your site is based out of the United Kingdom, you would want to utilize the .uk extension. Not only does this open the door to additional possibilities, in addition, it differentiates you from an international website. A website like name.com is an excellent resource for searching for possible domains and extensions. View Auctions for Domain Names You can also hit auctions to purchase a domain name which was/is previously owned. There are numerous sites that have been acquired by investors as a means to monetize a site. They will purchase a domain and fill the website with lists and links to other sites simply for lead generation. Contact A Domain Broker There are other instances when somebody had a domain and did not do anything to it or the business didn’t work out and the domain name has expired. In cases like this, the domain name is now available for purchase. If your preferred domain is not up on an auction, then you could attempt to work with a domain name expert or broker to contact the current owner. If you decide to go it alone, make sure you contact the owner and gather the information that can assist you in ultimately determining if this is the right asset for your brand. If the owner is considering selling the domain, you want to do a little investigating to learn how much it’s worth. Our domain broker services can complete a professional domain name appraisal to determine how much traffic is visiting the website. It may not be the only element in determining the site’s value, but it’s a powerful indicator.
Default alt text
A Premium Domain Name Make All the Difference

The Internet evolves and is shaped by countless businesses, people, non-profits and an array of countless other entities looking for eyeballs in an ever-changing World. A Premium Domain Name Make All the Difference Your Premium domain name strategy is crucial in today’s clutter. Brand’s work hard to engrain their product or service, and establish market positioning, relevance—and ultimately dominance. Savvy brands understand the importance of creating something catchy and memorable. They need to separate themselves from their competition in ways that remain top-of-mind for their targeted audience. Let’s review the top ten below according to Wikipedia.org: Rnk Company Rev($B) FY Employees Mkt. Cap Location Founded 1 Amazon $232.9 2018 647,500 $802.3 Seattle 1994 [1][2] 2 Alphabet Inc. $136.8 2018 98,771 $791.01 Mountain View, CA 1998 [3][4] 3 JD.com $55.7 2017 137,975 $34.84 Beijing 1998 [5][6] 4 Facebook $55.01 2018 25,105 $486.39 Menlo Park, CA 2004 [7][8] 5 Alibaba $39.90 2018 66,421 $432.12 Hangzhou 1999 [9][10] 6 Tencent $36.39 2017 44,796 $434.66 Shenzhen 1998 [11][12] 7 Netflix $15.8 2018 5,400 $153.39 Los Gatos, CA 1997 [13][14] 8 Booking $12.7 2017 22,900 $92.94 Norwalk, CT 1996 [15] 9 Baidu $12.40 2016 45,887 $88.11 Beijing 2000 [16][17] 10 eBay $10.75 2018 14,000 $32.07 San Jose 1995 [18][19]   Each one of these companies went out and acquired their core-premium domain name. They understood the value of the .com as their global brand. Let’s dig a bit deeper in the strategy of one of the major power-houses listed above. Facebook.com, listed at number four also owns many other valuable pieces of digital, beach front real estate. Take for example, FB.com which complements the existing digital strategy that was already in place. Facebook has parlayed their web presence by building another piece of digital real estate on their own majestic piece of real estate. Another example is Booking.com, with more than $12B in revenues. They do a phenomenal job of attracting users with constant ad-driven messaging. They have partnerships with more than 660,000 hotels and provide a valuable service to their clientele. Why Premium Domains? Let’s continue with the beach-front real estate analogy. For the past thirty years, brands swallow up the short, brandable .com domains. These are the assets that provide the most upside, equity and long-term value to the brands. These assets can hold generic value, such as Booking.com, or be more brandable, such as EBay.com or Baidu to name a few. Premium domain names have commercial appeal and are typically, very memorable. Brands spend huge amounts of money attracting new users and creating brand credibility. Digital strategists are competing for a smaller piece of the available premium domain name inventory. Sure; anyone can build a brand, using any extension, to the right of the dot. It’s how you develop the brand, and create long-term equity for your company. Companies should always acquire the shortest variation for their brand. This doesn’t have to be the only strategy. Companies should outline a comprehensive domain name strategy that not only covers their brand, but any additional reputation management, or brand defense needed to protect your corporate brand positioning. Simply put, premium domain names add the following instant upside: Brand-dominance and positioning Equity toward the long-term exit strategy Inability to build—defensive strategy against your competition Own the real estate before your competitors do! Direct Navigation Search—people search the keyword every day! How many eyeballs are you missing? IP and Trademark positioning Credibility and Awareness Most successful brands have identified the importance of the premium domain name. Most of them now have dedicated digital strategists or digital departments to handle the larger need for digital integration and social media components. Brands should spend wisely, and methodically when securing a new brand, or piece of beach-front digital real estate. Get it right the first time Companies should always use this checklist to make sure they are not leaving their money on the table Hire an expert—when you get your maintenance on your car, do you do it yourself? Spend your time wisely, on what you do best and leave domain acquisitions to the experts! Conduct Research—who owns the asset, and for how long? Is it being used? Are there active trademarks? What’s the history of the link profile? Variations and Alternatives—brands need to nail it. To do this, sometimes, they need to think outside the box. Find viable alternative assets that define your image and brand. Negotiation is key—do you negotiate for a living? We do. We remove the emotional attachment and red tape to manage both buyers and sellers’ expectations.  Be Flexible—sometimes you have to give a little, to get a little. Don’t be afraid to be flexible and offer ways to mutually-benefit the other party in your transaction. Be Honest—honesty and integrity go along way. Be true to your word, and don’t go back on what you say. This is critical for deals to succeed. Ask Questions—hold your broker or expert accountable and ask appropriate questions. Some domain transactions move quickly. A clear line of communication is necessary to save valuable money and time. Due-Diligence—dig for more information, market comps, fire-power necessary to make the case. Goes back to the research tidbit above. Timing—don’t hunt for a CBD-themed/ Marijuana-type name when there is mass decriminalization and legalization occurring. The market is just too hot, and pricing will be way too inflated. Instead, names should be selected, “ahead-of-the-curve”. Save money When buying a premium domain name, it’s important to ask the right questions. This can save the buyer tons of money in the long-run. The most widely used example relates to trademarks tied to a name, or brand. Many companies have secured a domain name for commercial use, but never take the time to search the trademark database. This quick search can save clients thousands of dollars. Premium Domain Names make total sense for any emerging brand, looking to scale their brand accordingly. Shortening the global domain name is still the foundation for successful growth. The top companies around the World continue to focus on the sensible .com for their brand growth. This validates the need for superb, premium domain name for your company and brand. Get it right the first time and save money in the long-run while adding that much needed credibility and equity value. Drop us a line to discuss your domain name strategy and digital branding plan. Click here, to acquire your next premium domain name.

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.

Free Consultation

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 your premium domain?