DAN.com just announced an automated lease to own option that its domain name sellers may employ on their DAN.com marketplace listings. By enabling this option, sellers will allow buyers to lease their domain names for a set time period on the way to executing a sale at the buy it now price. This new domain financing option was announced this morning in a blog post shared by the company via Medium.
DAN.com has offered an installment plan where sellers could allow buyers to pay for a domain name in up to 12 installments. For instance, a $60,000 domain name can be acquired for $5,000/month for 12 months. With the new lease to own option, a buyer can stretch out the payment plan for up to 60 months. Sellers can choose how long they will allow a buyer to stretch out payments in their account settings. This option can be helpful to cash strapped businesses and startups that will use the domain name as a springboard to building their business and pay it off over time.
One major difference between the lease to own plan and the current installment plan is the escalating purchase price for longer payment periods (can also be looked at as an early payment incentive). The longer the payment term is extended, the more expensive the domain name is. Here’s how the markup works, according to the blog post:
2–12 months = no markup added
13–24 months = 10% markup
25–36 months = 20% markup
37–60 months = 30% markup
Again, using the $60,000 example, if a buyer wants the lease to own option for 24 months, the price of the domain name will increase to $66,000. On this two year deal, the payment would be $2,750/month ($66,000/24 months). If a buyer does not pay in full, the domain seller gets the domain name returned and keeps all payments that had been made to that point.
Here are two screenshots from BaldEagle.com, a domain name in my account, to see how this financing options looks to buyers when the 60 month payment option is permitted. One thing you will note is that the lease to own option is emphasized over the buy now option:
I think this is a smart idea, and I have been offering similar deals to select prospective buyers over the past few years. This type of deal can be helpful to buyers who are short on funds but have a desire to build their brand on a particular domain name with less money spent at the time of the sale.
I do have a couple of concerns about deals like this – not exclusive to DAN.com.
The first is that the buyer makes the initial payment(s) and uses the domain name for nefarious purposes or uses it in a way that harms the good will of the domain name. SEO damage, spam email damage, attempting to sell the domain name to a trademark interest, or filing a trademark that impacts future usage of the domain name are some examples that could leave the domain registrant with a less valuable domain name or even a UDRP/lawsuit as a result of usage. When I do my own lease to own plans, I typically require a heftier downpayment in an effort to mitigate these issues.
The second concern is that five years is a very long time to be taking payments, especially for a relatively inexpensive domain name. Yeah, it’s nice to have monthly income but I can see it being frustrating to get paid a little over $100/month on a domain name I am expecting to sell for $5,000. I believe there is a minimum monthly payment, so lower priced domain names won’t be able to have a 60 month payment option.
A final consideration I will make for myself (and others should make for themselves) is that I am entrusting DAN.com to hold my domain name, collect payments, and remit payments to me for either a short term or a long term. If the DAN.com team wins the lottery and closes up shop, I want to make sure there are adequate safeguards in place so I know my domain name(s) and payments remain secure and not impacted.
Sellers should be sure to review the DAN.com TOS to make sure the language is acceptable to them and protective of their assets before agreeing to the TOS.
I really like the idea of having an automated process like this. When I have offered this option to buyers, I have occasionally ended up going through rounds of legal reviews to ensure both parties are adequately protected. Having built in TOS governing the transaction should help eliminate some of the pain points that have bogged down deals.
The Medium blog post has more details about this new offering, including the commission structure and directions to implement this option on domain name listed for sale at DAN.com.