NameCape

How Does Domain Name Escrow Work

By NameCape

Posted on 8 Jul 2017 01:03:40


Escrow is an account or service held 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.

What are the 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.

What is 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.

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.

   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.

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.

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.

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.

What other Alternatives to Domain Name Escrow?

  • Fast or Instant Transfer: If the sum of transaction is not much (up to $500), you may choose to use less protracted payment method such as Paypal. The buyer makes payment, and the domain name ownership is transferred to him within 48hours. This process may take longer, depending on your domain registrar.  Generally, 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. You can write the contract to state that the defaulting party pays the fees of the court or arbitration.

 

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.

How does the seller move the domain name to the buyer’s account?

After a domain name sale completes, the seller must move the domain name to the buyer’s account. The method to move the domain name and the person who must initiate the move depends on the seller and buyer’s accounts:

  • If the buyer and seller have accounts with different registrars, then the buyer (new registrant) must initiate a domain name transfer. This method moves the domain name from one registrar company to another and, for most top-level domain names (TLDs), includes a one-year extension of the current registration period. If you are the buyer, contact your registrar for more information about initiating the transfer. Most of our domain names are registered with GoDaddy.

For information about transfers to and from GoDaddy, see Preparing to Transfer Domain Names to GoDaddy and Transferring Domain Names to Another Registrar.

  • If the buyer and seller both have GoDaddy accounts, then the seller must initiate an account change. This method, also known as a registrant transfer, moves the domain name to another account at the same registrar. The domain name expiration date does not change because an account change does not include a registration extension.

 

 


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