When someone else owns the perfect domain you need for your business, you might decide to buy it from the owner. How do you ensure that the transaction goes smoothly?
This is where escrow services come in. Most people only think of escrow services when buying or selling a house. But escrow can be used to secure handle money when transferring just about anything, including domain names.
How Do Escrow Services Work?
Let’s say you agree to buy a domain name for $2,000. Now you have a bit of a conundrum: do you pay the money and trust that the owner transfers the domain to you? Or does the seller have to trust you by transferring the domain before you pay?
That’s where escrow comes in. An escrow service is a third party that holds the money until the domain name is successfully transferred. It works like this:
- The buyer and seller set up an escrow transaction.
- The buyer sends the money (via wire, credit card or another method) to the escrow company.
- Once the escrow company confirms that it has the money, it instructs the seller to transfer the domain name.
- When the buyer confirms that it has received the domain name, the escrow company disburses the money to the seller, minus their fees. (You can usually choose which party pays the fees or split it down the middle.)
Both parties can rest easy knowing that a transaction with an escrow service protects them from fraud.
Choosing an Escrow Service
Escrow.com is the heavyweight for domain name sales, completing over a billion dollars worth of domain name transactions. However, there are other escrow companies you might also want to check out. Payoneer, a big international payments company, started offering an affordable escrow service in 2016.
Another option is to use PayPal, but seller beware. PayPal’s buyer protection guarantee covers intangible goods like domain name, but its seller protection does not.
If you go with an escrow company, make sure to choose a reputable and licensed escrow company. Scam escrow companies do pop up from time to time.
How Much do Escrow Services Cost?
Most reputable companies offer escrow for a reasonable fee which usually will be a small percentage of the transferred amount.
In our hypothetical example, Escrow.com would charge between $65 and $126 for a hypothetical $2,000 transaction. The price depends on if the buyer pays with a credit card or wire transfer.
Are you buying a domain name from someone right now? You can transfer it to Namecheap during the escrow, and then it will be ready for you to use as soon as the transaction is complete.
Andrew Allemann is editor of Domain Name Wire, the longest-running blog covering the business of domain names. Domain Name Wire has covered the business of domain name investing for over ten years.