Navigation

How Does Domain Name Escrow Work?

How Does Domain Name Escrow Work?Escrow is an account or service hold by an independent, trusted third party in a transaction process on behalf of transacting parties. You can use escrow for domain names, website development, custom programming, or any other intellectual property matter.

In a domain name escrow, an independent, trusted company acts as a third-party agent in the selling-buying process. The escrow agent connects the buyer to the seller, and ensures that both parties receive exactly what was agreed to before the purchase. In other words, the buyer will only receive the domain name once the seller has paid the escrow. And the seller will only receive the compensation for the domain name once it has been transferred to the buyer.

The third party escrow agent will not only collect and disburse funds, but will also verify domain name ownership prior to the transaction, collect documents or other important materials from the seller, and execute the agreement based on contractual prerequisites.


Domain Name Escrow Costs


Domain name escrow companies charge various amounts for this service; usually a percentage of the domain name selling price. For example, Escrow.com — one of the most trusted online escrow services — charges per their schedule:

Transaction Amount Standard Premier
$0-$5,000 3.25% ($25.00 minimum) 6.3% ($25.00 minimum)
$5,000.01-$25,000 $162.50 + 0.26% of amount over $5000 Not available.
$25,000.01 + 0.89%


If a domain name were selling for, say, $1,000, the fees charged by Escrow.com would $32.50 for Standard service and $63.00 for Premier service. (Escrow.com’s services are defined here.) A $200 domain name sale would have an Escrow.com cost of $25.00.


List of Domain Name Escrow Services


  • Agreed.com
  • Escrow.com
  • Sedo
  • eCop
  • Moniker
  • EscrowDNS
  • MiniEscrow
  • SafeFunds
  • Transpact

    Reasons for Using Domain Name Escrow


    Domain name escrow is employed because it is the safe way in online transaction of a domain name. This employment ensures a buyer that a domain will be obtained and on the other hand the seller will be paid. In other words, when the seller and buyer do not know each other, it is a system that they can trust to protect their online investment. Although different escrow company will apply different service, in general, the following is the detail of benefits for the buyer and seller.

    Domain name buyer escrow benefits include:

    Security: Since the money is hold by the escrow company, there is very little opportunity for the buyer to lose the money without getting the domain name. Additionally, the buyer feels secure because details of credit card or other financial information are only disclosed to a trusted institution.

    Assurance of a Domain: Once the buyer sends the money to the escrow company, the company will inspect and notify the seller to send the domain name. Therefore, the buyer will be able to confirm domain ownership before disbursement.

    Convenience: A buyer can use various method of payment like Visa, MasterCard, Amex, Paypal, check or money order. An escrow company will provide quality customer suppor; you can reach them by phone or email.

    Domain name seller benefits include:

    Security: Before transferring the domain, the seller will obtain payment verification. Therefore, the seller is also protected against credit card fraud, lack of funding or credit card chargeback. The escrow company will disburse the money once provisions are met.

    Convenience: The seller can choose various methods to receive the payment. In addition, the company will also provide access to customer support via phone or email.


    The Process of Domain Name Escrow


    In general, the process of domain name escrow involves collecting the money, pushing the seller to transfer the domain name to the buyer and disbursing the money to the seller. However, there are also companies which hold both the money and the domain into a holding account to prevent the seller receive the fund without domain name transfer. The following is the general process of a transaction using the domain name escrow.

    1. Agreement between Buyer and Seller
      After registering with an escrow company, both parties should agree to the terms of transaction which basically involves price, domain name, method and date of payment.
    2. Payment to Escrow Company
      The buyer transfers the money to the escrow company using approved payment method. Once the payment is confirmed, the company will notify the seller to transfer the domain name. In some cases, the seller has already transferred the domain name to the escrow company.
    3. Domain Name Transition
      The escrow company will prompt the seller to work with the buyer and registrar to change the domain name ownership. Different procedures apply to different registrars.
    4. Confirmation of Domain Name Ownership by Buyer
      Once the buyer confirms the domain name ownership, the escrow company will inspect whether WHOIS information reflects the buyer’s profile.
    5. Disbursement of the Money to the Seller
      After the escrow company inspects, checks and verifies that the domain name has changed ownership, the seller receives the money and the transaction is complete.

    Alternatives to Domain Name Escrow


    • Fast or Instant Transfer: Many after-market domain name sales companies offer the ability to quickly or instantly have the domain name transferred from the seller to the buyer upon payment. In this case, the seller hosts or lists the domain name with a marketplace, the buyer creates an account with the marketplace, the transaction is agreed upon at the marketplace, the buyer makes payment, and the domain name is instantly transferred. Afternic offers an instant transfer; Go Daddy Auctions didn’t have information on their website, but upon speaking to Ivan by telephone he said that the process of buying a domain takes a few days to a week and is “pretty much guaranteed” that you’ll get the domain name if you pay the money.
    • An Attorney: An attorney can help you draft a sales contract that clearly outlines the purchase agreement. A default by the other party, however, leaves you with either filing a suit in court, or seeking arbitration. In other cases, you can write the contract to state that the defaulting party pays the fees of the court or arbitration. An attorney can also escrow funds from a buyer and only disperse the funds to the seller until mutual agreement of services are rendered to buyer.

    Different companies may provide different services related to domain name escrow. Both buyer and seller should make sure that agreed escrow process provides a clear fee structure, step-by-step confirmation, and guaranteed transaction timeline.

    [Photo credit: joebeone]

    More About…

    Keywords:
    Companies:

  • Uniregistry.com

    Leave a Reply

    Comments should be respectful and on-topic. Read our full comment policy (opens in new window). Comments may be moderated; if not posted immediately, it is awaiting review and will be posted soon.

     

    3 Responses to “How Does Domain Name Escrow Work?”

    1. TeenDomainer says:

      I think domain escrow is a great idea if you are selling a name and it helps the other party feel better and trust you more.

    2. Juan T. says:

      Very useful summary. It’s been unclear to me up until now. Thanks for the domain name escrow examples.

    Domaining magazine site recommended by Domaining.com
    Copyright © 2010-2014 DomainSherpa. All rights reserved. Reproduction without explicit permission is prohibited.
    About  |  Affiliate Links  |  Privacy  |  Terms  |  Contact Us
    x
    Want All The Secrets?

    Subscribe to our newsletter and we'll share them with you. It's free; unsubscribe anytime.