Earlier this week, I wrote an article about using an option to buy a domain name. Since there are many types of deals that can be struck to acquire a domain name, I thought I would discuss some of them in a blog post.
It may be beneficial for a buyer and seller to work out a creative deal when a straight-forward acquisition is not possible. Some buyers don’t have the capital to buy a domain name as they start their business, and others would benefit from securing the domain name as their business launches. A creative deal can add value to the seller and give the buyer flexibility.
If you can think of other deal structures that aren’t mentioned below, please add them to the comment section so that I can add them to the article.
Types of domain acquisition deals:
Standard Acquisition – This is the most standard type of domain name sale. The buyer agrees to acquire a domain name for a set amount of money, and the deal is completed with one payment.
Financing – There are two ways a buyer can finance a domain name purchase, either with seller financing or third party financing. In the case of seller financing, the buyer pays for the domain name in installments over a set period of time, at a set rate of interest. In most cases, an escrow service like Escrow.com will hold the domain name in escrow while the buyer completes the payment. In the case of third party financing, a company like Domain Capital will be engaged, and the domain name will be paid for by Domain Capital, who will hold/own the domain name while the buyer pays off the loan.
Lease to Own – The buyer will lease the domain name at a set rate over a period of time, and once the full amount of the domain name is paid, the buyer will take possession of the domain name. If the buyer stops the lease payments, the domain name is returned to the owner, who keeps the payments made up until that point. A company like Escrow.com can be engaged to facilitate these deals.
Option to Buy – A buyer pays a domain owner a set option price to lock in the ability to purchase the domain name at a later date for the option price. If the buyer does not follow through, the seller keeps the option fee.
Sale with a Resale Bonus – A domain name is sold under the guideline that if it is subsequently sold by the buyer, the original domain owner will receive a percentage of the future sale.
Equity Exchange – The buyer of the domain name will subsidize the purchase price with equity in the company that will be using the domain name. Instead of paying for the domain name in cash, the seller will obtain equity in the buyer’s company or the company that will be started for the purpose of using the domain name.
Trade of Services – Instead of paying cash for a domain name, a company will provide services of the same value for the domain name. For example, if a house cleaning service buys a domain name, they will provide cleaning services to the seller of the domain name.