I am interested in knowing your feedback about a topic I’ve discussed in private with a few people during the last few years.
“Double dipping” is where an intermediary (can be a broker or marketplace) takes a percentage commission from the buyer of a domain name as well as the seller, and each person believes he is the only entity paying the commission. Similarly, this can also mean the broker or intermediary is pocketing the difference between a buyer’s price and a seller’s offer, and taking a commission on top of this.
I want to share two hypothetical examples to illustrate what I mean.
- A broker contacts me on behalf of a buyer and offers me $10,000 to sell ElliotsBlog.com to his client. I agree to the terms, which includes my paying a 15% commission. The broker also told the buyer he needs to pay a 10% commission for closing the deal, without mentioning that I am paying, too. Instead of making just $1,500 or $1,000 total on the buy or sell-side commission, the intermediary is actually making $2,500.
- I list ElliotsBlog.com for sale in a newsletter or on an aftermarket site for $10,000. Later, I am informed that an offer of $8,000 was made, and I accept it. The intermediary tells the buyer that my price is firm, and he agrees to pay $10,000 to buy the name. The broker pays me $6,800 after taking my 15% commission from the supposed $8,000 sale and also keeps the $2,000 difference between what the buyer paid and what I thought the sales price was. In total, the “commission” was $3,200 instead of $1,500 on a $10,000 deal.
In both of these cases, the buyer and seller are willingly accepting a deal that’s presented to them, so it’s not entirely unacceptable since both parties agreed to the deals as presented. However, neither would likely be happy if they knew that the broker wasn’t presenting the full offer or was charging double commission.
There aren’t as many legal regulations on brokering domain names as there are with real estate, where this would likely be prohibited.
If the buyer and seller are both happy with the deal as presented to each, is there an issue with this happening? What are your thoughts on this type of thing?