How Does Domain Name Escrow Work?


Hadley Bourn

Like other escrow accounts, domain name escrow is held by an independent, trusted third party in a transaction process on behalf of a buyer and a seller.

Parties can use escrow services for domain names, in addition to custom development or website programming. Using escrow will ensure the seller transfers the contents of a purchase to the buyer in full, without any conflict.

These services add to the security of the transaction by introducing a neutral third party.

Here is a breakdown of the process:

The Process

 Does Domain Name Escrow Work

In domain escrow, buyers and sellers must agree to use a neutral third party. Both parties will sign up for an account, providing personal information to verify their identity if mandated. Afterward, they can provide the escrow agent with the terms of their agreement and provide any answers to the third party that they may be missing.

Essentially, the escrow agent will ensure that the buyer receives the domain and title transfers as marketed, and the seller will receive the agreed-upon funds.

Once the agent receives funds, they will alert the seller to transfer the domain title to the buyer. In domain name ownership, the third party will manage the disbursement of funds and verify domain name ownership before the transaction.

When selling a domain, buyers and sellers must go through one of two processes. If the registrars are the same, they will undergo an Account or Push Transfer. If the registrars are different, it is known as an EPP Code Transfer or Authorization Code Transfer.

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It is important to note that before a seller can transfer a domain, it must be deemed eligible. An organization known as the Internet Corporation for Assigned Names and Numbers (ICANN) has date restrictions if the domain is being transferred between the registrar’s, affecting your ability to buy or sell.

 Does Domain Name Escrow Work

The Cost

Escrow services are not free and typically come with a small fee paid in proportion to the amount of the domain. On most platforms, they will charge an average of 3% with a minimum cost.

These fees are fair when considering the potential loss of engaging with a fraudulent party or costly alternatives like an attorney. Buyers may use an attorney to put together a legally binding contract that outlines the terms of the agreement.

However, if the seller does not provide the domain in question, the buyer will need to take their counterparty to court, which can be a lengthy and expensive endeavor. Alternatively, some domain selling websites offer instant transfers, which nearly guarantees that they will fulfill your order.

While escrow services offer the best security and cost, buyers and sellers should still do the necessary background research on the platform they plan to use. With new escrow providers popping up, it is important to consider fee structure and user experience before either party sends money.

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Why Should I Use an Escrow Service?

 Does Domain Name Escrow Work

With a more international marketplace than ever before, it is more likely than ever that you will come across a situation when you must transact with someone you don’t know. The escrow system ensures that the buyer and seller can trust each other and still engage in a transparent transaction, regardless of where the two parties are.

Additionally, purchasing a domain requires some additional steps due to its intangibility. Hiring an escrow company will ensure that the buyer will receive a domain that the seller owns.

Finally, new escrow platforms offer added convenience by providing additional payment options, including credit and debit, so buyers and sellers can make transactions from the comfort of your home.

Buyer Beware: Navigating Trusted Escrow Websites

While the concept of escrow services is secure, many scams have also arisen from fraudulent parties who want to make a quick buck. These fake escrow accounts will go to the extent of creating an illegitimate company to defraud users. To ensure you are using a legitimate platform, some basic scam patterns include:

  • Sellers that recommend a fake escrow site to the buyer. In these cases, there is a good chance that the seller is in on the scam. Doing some research may be needed from your end to verify the platform is legitimate.
  • Sellers may suggest alternative platforms if you are hesitant to use their initial suggestion. In many cases, this is a scam in which the seller has created accounts on multiple fake platforms.

As our buyer beware, knowing these platforms can ensure you don’t get pressured into using a service you aren’t comfortable with, and you have done thorough research on the company, its team, and its policies to verify legitimacy.