Domain name escrow – how it works?

Domain name escrowEscrow refers to a service or an account operated by a neutral, trusted stakeholder to hold money on behalf of various parties involved in a transaction process. Escrow can be used for, but not limited to, custom programming, website development and domain names. It is also very common in real estate deals.

A domain name escrow is a neutral, independent entity to the principals that acts as a go-between in a selling and buying process. The agent links the principals, that is, the seller and the buyer, and ensures that the parties involved meet their part of the bargain fully. This is achieved by ensuring that the party buying is furnished with the details of the domain name once the party selling has fully paid the agent. Once the escrow ensures that both sides have complied with the pre-purchase agreement, the domain name is passed on to the buyer.

Apart from collecting and passing on the payments, an escrow validates the ownership of the domain name before the transaction takes place, gather required documents or materials necessary and oversee the agreement as per the contract.

Costs of Domain Name Escrow

Costs of Domain Name Escrow
Charges vary depending with the company executing the services.
However, most companies use the percentage approach, which is a percentage of the domain name selling price., for instance, charges 32.50 USD for a domain name selling for 1000 USD in the Standard service package and 63 USD for the premium service package.

Domain name escrow companies charge various amounts for this service; usually a percentage of the domain name selling price.
For example,

List of Domain Name Escrow Services

  • Sedo
  • SafeFunds
  • eCop
  • Transpact
  • Moniker

Why should one settle for Domain Name Escrow

Online transactions are risky and in most cases, the gentleman agreement approach cannot be employed. The fact that both parties do not interact physically makes it harder to trust anyone. It is, therefore, prudent to involve the services of a domain name escrow to ensure that both parties deliver. That is, the buying party pays for the services while the selling party delivers the domain name.

Below are benefits of both the seller and buyer in general:

Domain name escrow is employed because it is a safe way in an online transaction of a domain name acquisition.

How the domain name buyer benefits

The buyers money is secure since it is held by the agent until the deal is done. Secure: Chances of losing the money are therefore almost zero. Disclosure of the buyers financial details, such as credit cards is solely presented to the agent, who is a trusted registered entity hence confidential details are secure. This is vital given the cyber insecurity state.

A buyer is assured of a valid domain name as they will be able to confirm the ownership of the domain name and inspect it before payment is made to the seller.

Convenience: It is convenient dealing with an escrow agent since no physical contact is required as the buyer can reach them through email or by phone. On the other hand, payment is easily done to the agent checks, money orders, Visa, Mastercard, Paypal or any other valid means accepted to the agent.

How the seller benefits

Security: Just as in the buyers case, payment is guaranteed. The selling party is therefore protected against being conned of their services, credit card fraud or chargeback that is common. Payment is made once the domain name is delivered, verified and accepted.

Convenience: The company offers customer support access through email or telephone, and this works for the seller. Payment option that is most convenient is advised by the seller as there are different available options in most cases.

The Process of Domain Name Escrow

In a nutshell, the process of the domain name escrow is collecting payment from the buyer, ensuring the seller delivers the domain name to the buying party and forwarding the payment to the selling domain name seller. Some companies, however, hold the domain name and the funds in their custody to ensure that the seller only gets paid after the domain name has been passed.

Seller Buyer agreement

Once both parties register with the agent, an agreement to terms conditions of the process is reached, which ordinarily involves payment date and method, the domain name and most importantly the price.

Payment to Escrow Company

The buying party pays the agreed amount of money to the using the payment method advised in the agreement to the escrow company. On receipt of payment, the agent will have the seller transfer the domain name to the escrow company if the seller had not done it earlier.

Domain Name Transfer

The agent ensures that the selling and the buying party work together with the registrar and acquire domain name ownership depending on the procedures of the particular registrar in question.

Buyer confirmation of Domain Name Ownership

The buying principal is required to confirm the domain name ownership: the agent company ensures that the WHOIS information matches the profile of the buyer.

Payment of the Seller

Once the agent confirms that the ownership of the domain name has been fully and correctly changed, the initially agreed upon payment is sent to the selling party.

Domain Name Escrows Alternatives

Instant Transfer:

Domain name sales companies provide platforms where the trading parties list the domain name and buyers create accounts on the same platform. Once the parties link up and agree, the transaction takes place on the platform, the buyer transfers funds, and the seller submits the domain name. The companies ensure that the domain name is transferred to the buying party fast if not instantly and the payment to the seller.

Fast or Instant Transfer:

One of the companies that offer instant transfer is Afternic. Ivan of Go Daddy Auctions, speaking on the phone advised that the process of a domain name acquisition takes up to one week. He guarantees that once payment is made, a domain name is assured.

An Attorney:

Some principals may choose to have an attorney escrow payment from the buying party and only forward to the selling party once the services have been delivered as agreed. In this case, the buyer and the seller both enter a written purchase agreement with the help and guidance of an attorney.

Services offered Domain Name Escrow companies vary in execution. Any party that intends to involve the services of a domain name escrow whether as buyer or seller should ensure that the process is clearly outlined. The fees charged, steps involved and process timeline should be well-defined.

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