Winner Default: Re-Auction or Offer to Under Bidder?

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Every auction venue deals with winning bidders that default and do not pay for auctions they win. I imagine every auction house has tools and processes in place to reduce the number of defaulting bidders, but I do not think it is possible to eliminate bidder defaults for a host of reasons.

Domain industry auction platforms that specialize in expiry domain name auctions have different policies regarding domain names that were not purchased by the high bidder. Here’s how I believe each operates when it comes to expired or deleted domain names:

  • GoDaddy – Next highest bidder gets a day to decide whether to buy the domain name at a price as if the higher bidder did not exist. The domain name is offered to subsequent bidders when the higher bidder passes.
  • NameJet and SnapNames – Domain name is re-auctioned or possibly kept by Web.com’s portfolio holding company.
  • DropCatch.com – Domain name is re-auction.

When it comes to re-auctioning a domain name, some people have argued that only the original bidders should be eligible to participate. I tend to agree with this because it could benefit the auction house if a higher result is achieved if other bidders are given the opportunity to participate.

I am curious what readers think should happen with expired / pending delete domain name auctions if the winning bidder does not pay.

22 COMMENTS

  1. Doesn’t this mean you DISAGREE?
    When it comes to re-auctioning a domain name, some people have argued that only the original bidders should be eligible to participate. I tend to agree ((DISAGREE?)) with this because it could benefit the auction house if a higher result is achieved if other bidders are given the opportunity to participate.

    (If you’ve ever wondered if people fully READ your blog; we do!)

  2. It’s perplexing why this problem persists. The solution is simple: Pre-funded accounts. Solves many problems.

    The real question is why don’t platforms implement it. Likely, they love the artificially inflated bids. That does call into question, who the shills are, and who they might work for by proxy. I only wonder so, because the problem is widespread and the solution is seemingly simple and rather harmless to business.

    • Sure, if you spend a couple hundred a month on auctions, that should be no big deal I imagine. However, that would still be quite a bit of money if people need to pre-fund all of their auction accounts.

      In practice, that is a terrible idea for someone like me who might spend a few $k one month and tens of thousands another month. Not a chance would I pre-fund an account with tens of thousands of dollars. What happens if I need the money to make a big private purchase? What happens if a company declares bankruptcy? What happens if I have $25,000 in my NameJet account and bidding goes to $25,500? For numerous reasons, pre-funding accounts is an unreasonable idea.

      Major auction houses like Sotheby’s, Christies, and Heritage do not do that, so it is unreasonable to think domain auction platforms would implement something like this.

      I do not have an answer for preventing bidder defaults, but this is definitely not the solution.

      • Elliot:

        Why would you need to ‘pre-fund’ your account? NameJet offers verified bidding. They could offer a deposit option but to allow those with deposits to retrieve their deposit post auction they would need to work with a third party or build the in-house technology to refund say $500 or $1000 within a few business days of the end of the auction.

        Why would you need $25,000 in a pre-funded account ; when most bidders are not even willin got be verified? If you require verified bidding and a deposit on after a certain bid amount is reached.

        For example, you have Elliot.com expire on NameJet. Its public to add backorder. Once it goes to PRIVATE auction, you could require a deposit only if a URL reaches a certain bid amount. Maybe its any domains that reach $5K?$10K$15K, etc.

        You add an extra day to the auction under NameJet’s current format to allow deposits to be made. The tech is there, and 3rd party partners can be used.

        I’m just speculating, but the shill bidding has been a problem for a while now.

      • And on the other side of the coin, the sellers would like their money faster! Always see complaints of payment taking forever. So ‘buyer’ doesn’t like their money tied up, seller feels same way.

  3. Re-auction to those that bidded the 1st time around, that are VERIFIED bidders. This can help eliminate a lot of the fake bidders bidding up domain names for whatever reason they do so to later not pay if they are the winner. Also, adding a deposit option along with verified bidding would improve auction platforms.

    To add the deposit option might require a partnership with a PayPal, Escrow *com or similar company – but it is doable at a cheaper rate in a COVID broken economy as business partners seek deals to bring in income in an uncertain economy.

    But this fake bidding undermines the credibility of domain name auction platforms.

  4. Require a $500 deposit refundable upon closing account. You forfeit the deposit upon defaulting which also closes your account. Just make the consequences harder for defaulting. Don’t focus on the re-auctioning process.

  5. I think bidders should be verified using their photo id prior to being able to bid. If every bidder id is verified, if they default, they would have a tough time getting verified again. If I bid under my own verified identity, then if I default, I can’t possibly get approved to bid again.

    Additionally there should be a threshold that requires a pre-authorization on a verified credit card. This avoids “pre-funding” and can be released immediately.

    In real estate, we must provide verification of funds when making an offer.

  6. Asshole#1 bid 1000$
    Me $900
    Asshole#1 bid 890
    Me $850
    Asshole #1 bid 840
    Me bid $800

    So asshole$1 bid at 1000$ and did not pay so the domain goes to me at %800 and not $900

    Plain and simple
    Domain bidding via internet , no transparency
    Sham and maybe inside job to get the $$$$ high..

    • You are more corrupt as you don’t honor your sold auctions, Chris Goh. Shame on you, you are full of BullS. As well making threats against people for asking you to honor your sale is patheic.

  7. Re-auction with original bidders where the auction was private. For public auctions where bidders may have held-off due to fake high bids taking to price too high too quick, a public best-offer round—one best offer allowed, and deposit required as a % of the offer to be valid, with further offer rounds for buyers with matching offers.

  8. The real question should be, with all those verifications, ID checks, extra layer of verifications, another ID check, why do so many auctions end up being unpaid and how is it possible that so many winning bidders default? I assume they’re getting blocked, blacklisted, kicked off the platform forever after they default, right? It’s not a 10 day, 30 day whatever ban, right? One strike policy applies. Yet it’s going on and it’s getting worse. How many shills, fakes, frauds can possibly be out there? It’s like an endless flood. People that go through the whole verification process just to default on a $2k bid and get banned for life…?? I don’t get it. And ultimately the conclusion for me is that the auction platforms are in it. They run bots, AI, whatever you want to call it. And we’e bidding against them. 9 out of 10 it goes through but sometimes the bots win and then they go down the line of bidders to “offer them a second chance”… They’re playing us.

    • ID is not verified, but checked visually for obvious forgery. And prepaid credit cards are sold at the supermarket.

      Or if legit buyer, it may be the auctioneers fault for not allowing time for the wire. Expect up to a week or more from any buyer not from the USA.

      No one knows because they never say anything, so we fill in the blanks, assumptions, conspiracies, etc etc.

      • Yes, assumptions and conspiracies like Enron, Worldcom and many others…
        Never ever underestimate the driving force of GREED in corporate America.

  9. Dropcatch and Dynadot have two of the most corrupt systems online Which is rampant with abuse. Dropcatch you could lose your house against a shill bidder against what we saw last week, same has been happening there for years.

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