Buying and Selling a Traffic Portfolio - Part 4

Buying and Selling a Traffic Portfolio - Part 4

So you’ve done your due diligence on the domain portfolio that you wish to acquire and everything looks like it’s good. All you have to do is part with your hard earned cash and wait for the authorisation codes so that you can transfer the domains into your registrar. So what’s the problem? A lot!

What happens if you send off your money and the seller decides not to transfer the domains. They now have your cash and the domains. What happens if you send your money and the domain statistics have been fabricated? What happens if you transfer your dollars and discover that the stats have been pumped up with purchased traffic? These are all good questions and I’ve heard story after story of people who have been burned by unscrupulous sellers…..so my advice is BEWARE!

Some buyers try and solve this problem with a contract. Personally I find that they are almost worthless. If you have a person that is prepared to steal your money then reneging on a signed contract is probably nothing big for them. So what’s the solution?

In a nutshell I would recommend using an escrow service. With a good quality escrow service both parties (ie. the buyer and seller) can agree to specific terms and a middle-man handles the actual transaction.

For example, you transfer your money to the escrow service and the funds are not sent onto the domain owner until the domains are under your control. This at least stops people from running off with your money and the domains. You can actually specify a variety of conditions that are agreed by both the buyer and the seller that the escrow company can verify before the seller can get their hands on your cash.

Seller financing has become very popular. The escrow company holds the domain in their account while the financial obligations are met. Say $12000 being paid in 12 monthly instalments of $1000. My only caution is can you imagine the headaches involved if the escrow company ceases to operate or becomes insolvent during a transaction of this kind. This wouldn’t be pretty!

There are a number of Escrow companies that domain owners use with Escrow.com being by far the most popular and the longest established. Over the years, they’ve spent a huge sum to ensure that they are in compliance with the various governmental authorities that manage the escrow industry and ensure that it’s clean.

Recently I had an opportunity to have dinner with Brandon Abbey, the president of Escrow.com. During dinner he mentioned in passing that they were in the process of going through an annual audit by the Texas State Escrow office and had just recently passed an audit of their Anti-money laundering policies. They are similarly audited by California and other states. If they don’t pass an audit then they were not legally able to trade as an escrow service in that state.

I should state right up front here that Escrow.com has been a great supporter of my blog. I’m very particular who I let advertise and I only work with companies that I consider have consistently displayed best industry practices over the years. I’ve found Escrow.com to be a well-managed business that has reached a high level of regard in the domain community for more than a decade.

There are a number of other companies that provide escrow as well, such as; Sedo and more recently DN.com, a company based in China. I have not heard anything negative about the escrow services provided by either of these two companies. Whatever company you choose for your escrow transactions I would recommend that you conduct your own due diligence. The most important thing that you should ask is whether they are legally able to trade as an escrow service in your jurisdiction. If they can’t then move on.

Remember that when you are involving a third party such as an escrow service that sometimes things can go wrong. They may not be able to react as quickly as you would like or do really complex transactions. Simply because they are now involved in the transaction you can also get some human error. My advice would be to get to know your escrow service really well and the people that are behind it. Make sure that you have their cell phone numbers and that they are prepared to take your call if a deal starts to unravel due to a mistake.

That being said, escrow companies provide an invaluable service for domain transactions to be conducted with a higher degree of commercial safety. So how much do they cost?

I went to the escrow.com website, found the calculator (https://escrow.com/support/fee-calculator.aspx) and entered in a transaction value. After playing around with a number of values you end up paying around 0.9% for high and 2% for low value transactions. Think of the charges as being a little cheaper than the merchant fee on a credit card.

There are a lot of transactions that are conducted via escrow in the domain industry and for very good reason. These companies provide a level of security over transactions that would otherwise be unavailable to the average domain investor.

Do your due diligence on the deal and whatever you do I would recommend that you at least speak to one of the escrow services. They could end up saving you a fortune and they only have to do it once for you to be eternally grateful for their services.

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Michael Gilmour has been in business for over 32 years and has both a BSC in Electronics and Computer Science and an MBA. He was the former vice-chairman of the Internet Industry Association in Australia and is in demand as a speaker at Internet conferences the world over. Michael is passionate about working with online entrepreneurs to help them navigate their new ventures around the many pitfalls that all businesses face.
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