I regularly receive price requests for domain names I own, but I don’t always give prices when asked. One of the major reasons why I am sometimes reluctant to give a price is that I don’t want a “prospect” to take my price and try to sell my domain name to someone else before he or she buys it.
I’ll share a hypothetical example with you:
Let’s say someone asks me about the price of [Example].com, and I give the person a price of $10,000. This person can then go out and try to find a buyer for [Example].com at a higher price than I quoted. If he is successful, he will buy the domain name from me and immediately flip it to his buyer. If he is not successful, either because he can’t find a buyer at a higher price or he is caught in the act, he will disappear without much of a trace. Aside from reputational damage, there is little risk for this person for doing something I believe is unethical.
Some people might say that there is nothing much wrong with this approach. In theory, the original seller gets his asking price and the buyer makes a profit on the resale. All parties are theoretically happy. Unfortunately, there is a major risk that is born by the domain owner when someone tries to sell his domain name without permission.
Let’s say the prospect received a price for [Example].com and pitched the domain name to [Example], Inc. without the permission of the owner. This company would not know that the domain name is being pitched to them without the permission of the domain owner. They could easily pass this email on to their IP counsel and file a UDRP or even litigation claiming that the domain owner is acting in bad faith by trying to sell them the domain name that matches their business.
Unfortunately, this activity happens more often than one might think. In fact, I know of a major UDRP that was won by the domain owner because of something along these lines.
When I receive a price request from someone I don’t know, I do what I can to identify the prospect. If I believe that this prospect could potentially try and use my price quote to re-sell it before a deal is done and I am concerned there could be added risk, I simply require that the prospect submits an offer.
There are different schools of thought about this; one says, “he who quotes a price first, loses.” 😀
You can quote a price range, or a minimum asking price, to tap their potential. Regarding the reselling/flipping issue, quotes should come with an expiration date and a personalized reference.
This scenario doesn’t just play out in the domain market. In red hot real estate markets, like Vancouver, this process (referred to as “shadow flipping”) has received a lot of negative press coverage recently.
The potential purchaser of a property can (with the assistance of the listing agent) flip the sale to another purchaser and leave the transaction with profit in hand, without ever having actually owned anything. Sometimes this happens multiple times before the closing date. The original owner usually knows nothing of this, and they aren’t the ones collecting the additional cash.
I often use real estate analogies to explain to family and colleagues about domain investing. This’ll be another one to add to the list of examples!
It would be an extreme case for a domain owner to lose their domain to a prospect pitching a domain without their consent. The domain owner would probably lose money fighting this unfair case.
This domain owner can prove they never pitched the domain to a conflicting party. IMO, it is best to save all emails between the prospect and you.
Easy way is to request the party submit an offer. This is really tough to do since we have no idea what the domain owner wants for this domain. There is no good strategy to locate this ballpark figure and make the right offer.
Buy-it-now prices remove the mystery out of domain purchases. It gives both parties ample information to close a deal. However, a domain owner may not maximize a hot domain property with this approach.
Good info on the potential outcome of revealing a price in domain negotiations.
“This domain owner can prove they never pitched the domain to a conflicting party. ”
Potentially, but keep in mind that the conflicting party doesn’t know that the person who is pitching them the domain name is not associated with the domain owner. They may assume that the owner authorized the pitch and is therefore guilty of trying to profit off of its marks.
At the end of the day, responding to a UDRP is expensive and necessary. I wouldn’t want to put myself in a position to have to defend one of my domain names because someone unethically tried to sell it to a company I would never approach on my own because of potential conflicts.
I vaguely remember a case approx. 4-7 yrs ago, where a domain broker contacted a TM owner and offered a domain. The domain owner did not know anything about it but eventually lost the domain. I believe the broker was trying to prove he had a client for this premium domain.
In real estate, this practice is legal- known typically as the future estate. There are many interests in property either real or digital. As an example a writtenpurchase agreement between parties is an asset itself and can be sold for profit. In terms of intellectual property the principles are the same not withstanding a trade mark issue as illustrated. Don’t frown on the practice, rather learn from it and use it to your advantage. Enter an agreement written or verbal, and assign it. If trying to protect yourself from blind assignments, restrict assignments without your consent. Best of luck out there!
There are different risks with intellectual property.
Outside of the udrp illustration, what are the risks you have in mind?
Litigation would also be a concern. A company could opt to file a cybersquatting lawsuit instead of a UDRP.
It’s still a way of doing business I guess, to eliminate risks. Quite similar to what Bill Gates did this to IBM (I think). Most lux condominiums are being sold this way these days, also iphones, tesla products.
It really comes down to what a domain investor wants IMO. If you quote a price and you are very happy with the ROI then would it be of a major concern if they then purchase it and then on-sell it?
There may be the occasional regret when it on-sells $x,xxx-$xx,xxx+ and it does happen.
It’s only my opinion that leaving a bit of money on the table will give you a higher chance to sell the domain.
Usually we would have slight knowledge if the domain is going to be sold to end-user, domainer or domain broker?
Great article by the way!
Jason form New Zealand
I have no issue with people buying names from me and reselling them for a profit.
I would take issue with someone getting a price from me and trying to sell it to others before agreeing to a deal and potentially putting my domain name (or even my business) at risk.
In that case I completely agree with you!
What is to stop some spammer from India for instance to email Embrace Cosmetics with a $1M asking price, in hopes of buying Embrace.com you at a fraction?
This is why so many damn facebook, google type domains are registered out of India, China they have no recourse against these people.
I have seen traces of such activity in the industry, but most of these sources seem to operate offshore.
Not much I suppose, but the risk is that I say no regardless of what they offer. It would probably make more sense and be less risky for them to only try this with names they know they can buy.
I get a fair amount of emails like “Can you give me a price for this domain?” usually for one word, premium names, from anonymous email accounts. I just ignore them now. I don’t mind quoting a price to someone who engages with me, and is a legitimate buyer.
This is one of the reasons all of my domains aren’t publicly shown or posted at forums. All of my domains are on their own sales pages but the combo of them all 400+ aren’t available for anyone to view in bulk. I also put minimum offers in so offers below that get told to raise their offer so I only deal with serious buyers instead of flippers.
Well it would seem to be a form of “front running” but as I was looking into that, look at what I found here:
Who knew that was up on Wikipedia? Haven’t seen Daniel Stager posting anywhere in a long time, but I remember him.
P.S. Had this completely known and visible guy up to $15k recently after much dialog and then he vanished in the wind. Had the impression he had been “front running” on me, as in doing exactly what Elliot is talking about here.
p.p.s. I knew this guy who worked at Bear Stearns making ~$850,000 a year as a young managing director in his 30’s. He was quite a wunderkind and Goldman Sach’s wanted him. They offered over $1 million. He didn’t really want to go to Goldman Sach’s because at Goldman Sach’s he would be working in a cubicle for over $1 million, while at Bear Stearn’s he already had an office. LOL. So he took advantage of the situation at Bear Stearns by telling them Goldman was ready to welcome him with open arms for $1m-plus in order to squeeze Bear into giving him a $275,000 raise – to stay where he wanted to stay anyway. Afterward the guy at Goldman was really mad at him and (rightly) accused him of having deceived and used him like that just to (truly) squeeze more out of Bear Stearns where he wanted to stay to begin with. Eventually he became a young senior managing director till whatever machinations led to the Bear Stearns implosion which also threatened to virtually bring down the whole economy more or less. But no great loss for guys like that, as he’s still on top somewhere else in the Wall St. neighborhood now.
So it would seem to me that this kind of behavior Elliot is talking about is also analagous to something like that.