Domain Sales

During the last few years, I’ve heard about a number of people offering seller financing on their domain name deals. If a buyer can’t pay for a domain name purchase entirely up front, and he doesn’t wish to seek a more traditional financing option like Domain Capital (or doesn’t qualify), seller financing may be an option.

There are a number of advantages to self  financing  a deal, and there is also a fair amount of risk involved for both parties. Inc. Magazine has an article about seller financing, and I think it’s a good read if you’ve ever considered this option when selling a domain name.

I self-financed one deal, and it hasn’t turned out as great as I hoped. The plus side was that after the first payment was received, the deal was profitable for my company. The downside is that the buyer hasn’t paid off the purchase yet, despite passing the final payment date last month. The buyer is an end user who has a small business, and I felt guilty about demanding payment. He has promised payment in Q1.

Self financing can be a decent option to close a domain sale, but you should know the risks and weigh them against the advantages.

Thanks to Lonnie for sharing.

Just about every day, I spend some time reaching out to end user buyers to try and sell a domain name. Frequently, I will receive an offer for one of these domain names, either as an opening offer or a counter offer to my price. More often than not, the counter is less than the price at which I want to sell the domain name.

When this happens and the buyer won’t budge from his offer, I have a few choices:

• Sell the domain name for less than the price I want
• Keep the domain name
• Use the offer as a means of extracting a higher offer from someone else

No matter what decision is made, it’s important to keep in mind that the offer that was made to you may not be there in the future. I like to think that offers that have been made, especially those that were solicited by me, would be valid for an indefinite period of time. Unfortunately, that is not the case.

Some buyers may have money they are willing to spend at that point in time, and once the time passes, that money is no longer available. Others may have waning interest in the domain name after time passes.

When you have an offer on the table, it’s important to realize this offer will likely be pulled back in a short period of time, and that you can’t count on a buyer to follow through days or weeks later. As much as I hope that a rejected offer is followed up by a better offer, that’s not always the case and frequently isn’t the case.

Depending on your situation, it might benefit you to take a bit less than you wanted, especially if the responses are fewer than you expected.

Hiring a domain broker is an effective way to sell a domain name. Reputable domain brokers will know most of the buyers within the domain industry, and more importantly, they know how to reach out to end user buyers to sell a domain name. They also should excel at negotiations in order to get top dollar for your domain name(s).

It’s my experience that a domain broker who is going to put the time into selling your domain name will want to know that they are exclusively working on your domain name so that their efforts and financial commitment aren’t wasted. They will also expect a specific commission rate for the sale of your domain name. All of this should be discussed in advance and worked out with a brokerage agreement.

I want to share 10 questions you should ask a domain broker before agreeing to sign an exclusivity agreement as well as why I think these questions are important. If you have additional questions that you think would be beneficial to ask, please share them in the comment section.

• Is my asking price reasonable? If your trustworthy broker thinks you are asking too much from an end user perspective, you might be wasting time. You are almost never going to get max value when you are seeking a buyer vs when you receive a direct inquiry. If your asking price is reasonable, you have a better chance of selling your domain name. You will also likely have a broker who puts a greater effort into selling your name since he thinks there’s a good chance it will sell.

• Have you sold similar domain names, and if so, what names at what prices? Working with someone that has experience in your vertical can help you sell a domain name more quickly. They know how specific buyers think, and they can give them reasons why your domain name is worth what it’s worth.

• What other domain names are you currently selling that are similar to mine? If they have names for sale that are in the same field, they may be more likely to contact end user buyers to sell the other names. On the other hand, if they have better names at better prices, your name becomes less  desirable  to buyers and will look even more overpriced.

• Will you be contacting end user buyers on my behalf? It’s great if your broker can sell your domain name at your asking price to other domain investors via newsletter, but if it sells via newsletter, it was probably priced lower than end user value. That said, quick cash sales serve a purpose and I am always happy to sell profitably, quickly. If you want to maximize the price you receive for your domain name, you will probably want your domain broker to pitch it to end user buyers.

• Are your contact methods legal and/or spammy? You probably don’t want a broker to send out hundreds or thousands of spammy emails, especially if they use software to do it. First off, that might not be legal. Secondly, it might irritate a whole bunch of potential buyers and that could “poison” your name. It may be more efficient for the broker, but it’s probably not going to help you sell a domain name.

• How long a period of exclusivity do you require? Most brokers who plan to put an effort into selling your domain name will require an exclusivity agreement. They don’t want to put time in trying to get someone to buy a domain name and have you sell it to them independent of them. Find out how long this period lasts.

• What is your commission rate? Do you give a discount if I find a buyer while under exclusive? Most brokers charge between 10-20%, with 15% being the most common rate. If a broker is going to put more effort into finding a buyer (ie attending a conference on your behalf, you should expect to pay more). In addition, if you sign a 6 month exclusive agreement (I would not), and someone inquires about the name in the meantime, you shouldn’t have to pay the full commission rate. You should ask this up front to avoid making assumptions, because technically, you would be on the hook should a deal be struck while under the term.

• Do you handle escrow or use an escrow service? I always recommend using Escrow.com even if the deal was brokered and the broker is willing to act as the intermediary. There is no reason for the broker to handle the money you are owed, and with Escrow.com, you can select a brokered transaction so the broker will be paid by Escrow.com.

• Will you be doing anything special to sell my domain name? Some brokers go above and beyond when selling a domain name. They attend industry specific tradeshows and events to find end user buyers. Some put together pitch books sharing information about why a domain name has value. Others will meet with buyers in person since that’s how business tends to be done at large companies. Be sure to discuss who will pay for these marketing expenses.

• Do you actually have a buyer for this domain name?  One tactic I’ve seen and experienced is when a broker emails me about a domain name out of the blue to tell me they may have someone who wants to buy the name. In the excitement over the possibility of making a big sale, the domain owner signs an exclusivity agreement and the broker then proceeds to try and find a buyer. The initial email makes it seem like they have someone ready to buy, but in reality, it’s usually just a tactic to try and get someone to sign an exclusivity agreement so they can then start the process of finding a buyer.