Understanding Domain Escrow

## Understanding Domain Escrow: How Domain Transactions Are Protected Buying a domain name from a private seller involves a fundamental problem: someone must move first. If the buyer sends money first, the seller can take the payment and never transfer the domain. If the seller transfers the domain first, the buyer can refuse to pay. This mutual distrust problem — familiar from any large private transaction — is exactly what Domain Escrow solves. Escrow services act as trusted neutral intermediaries. The buyer deposits funds with the escrow service; the seller transfers the domain to the buyer's registrar account; once the buyer confirms receipt of the domain, the escrow service releases the funds to the seller. Neither party is exposed to the other's potential dishonesty at any point in the transaction. Understanding how escrow works — and why it is essential for any significant domain purchase — is foundational knowledge for everyone operating in the Domain Aftermarket. ## How the Escrow Process Works: Step by Step ### 1. Agreement to Use Escrow When a buyer and seller agree on a price and terms, they also agree on an escrow provider. For transactions above $1,000, professional escrow is strongly recommended regardless of how well the parties know each other. ### 2. Escrow Account Setup One party (typically the buyer) initiates a transaction on the escrow platform by entering the deal terms: domain name, agreed price, who pays the escrow fee (buyer, seller, or split), and the transfer instructions. The escrow service sends an email to both parties to confirm the terms. Both parties must accept before the transaction proceeds. ### 3. Buyer Deposits Funds Once both parties have agreed to the escrow terms, the buyer sends payment to the escrow service's holding account. The escrow service accepts payment by wire transfer, credit card, or PayPal (depending on the platform). Funds are held in a segregated, FDIC-insured account — the escrow service cannot access them for its own purposes. The seller is notified when funds are secured. At this point, the buyer's money is protected even if the seller fails to complete the transfer. ### 4. Seller Initiates Domain Transfer With payment confirmed in escrow, the seller initiates the domain transfer. This typically involves: - Unlocking the domain at their registrar (disabling domain lock) - Obtaining the authorization (EPP/auth) code from their registrar - Providing the auth code to the buyer The buyer enters the auth code at their registrar to accept the incoming transfer. Depending on the domain's TLD and registrar, transfers typically complete within 5–7 days for .com/.net/.org. Country-code TLDs may have different timelines. ### 5. Buyer Confirms Receipt After the domain appears in the buyer's registrar account, the buyer logs into the escrow platform and confirms receipt. Most escrow services include a defined inspection period (commonly 2–5 days) during which the buyer can verify the domain meets the agreed terms before confirming. Use WHOIS Lookup Tool during this step: verify that the registrant information has updated to your details, the registrar reflects your account, and the domain is properly locked. ### 6. Funds Released to Seller Once the buyer confirms receipt, the escrow service releases the funds to the seller. The seller receives payment net of escrow fees, via their chosen payout method (wire transfer is standard for large amounts). The transaction is now complete. The domain is in the buyer's account, the seller has received payment, and the escrow service's job is done. ## Escrow.com: The Industry Standard Escrow.com is the dominant escrow provider for domain transactions, processing billions of dollars in transactions annually across domains and other digital assets. It is licensed and regulated as an escrow provider in California and is the default recommendation for significant domain purchases. Key features of Escrow.com: **Transaction types.** Escrow.com supports standard domain transactions, domain brokerage transactions (three-party), installment payment plans, and bulk domain transfers. **Fee structure.** Escrow.com charges a percentage of the transaction value (approximately 3.25% for transactions under $25,000, declining at higher amounts) with a minimum fee around $25. Fees can be paid by buyer, seller, or split 50/50 — this is negotiable and should be agreed before the transaction is initiated. **Dispute resolution.** If a dispute arises during the inspection period (buyer claims domain was not delivered as agreed, or seller claims buyer is refusing payment in bad faith), Escrow.com provides a formal dispute resolution process with defined rules and escalation paths. **API integration.** Escrow.com provides an API that domain marketplaces and brokers integrate into their platforms, enabling seamless in-platform escrow without redirecting to an external site. ## Platform Escrow vs. Independent Escrow ### When to Use Platform Escrow Major auction platforms and marketplaces (GoDaddy Auctions, Sedo, Afternic, Dan.com) have built-in escrow or payment handling systems. For transactions that originate entirely within these platforms, using the platform's payment system is convenient and provides integrated dispute resolution. The platform's process automatically handles the sequencing: the domain is held in the platform's systems while payment clears, then transferred to the buyer. You do not need to separately coordinate an auth code transfer because the platform handles the registry interaction. ### When to Use Independent Escrow For transactions that originate outside a platform — direct contact between buyer and seller, broker-arranged deals, or negotiations that began on one platform but are being closed independently — use Escrow.com or a similar independent service. Platform escrow requires both parties to have accounts on that platform; independent escrow does not. For transactions above $10,000, many buyers and sellers prefer Escrow.com even for platform-originated transactions, because it provides a more formal paper trail and a clearer legal standing if disputes arise. ## Installment and Lease-Purchase Structures Escrow.com also supports installment payment arrangements, which are common for mid-to-high-value domains where the buyer cannot or does not want to pay the full price upfront. A typical structure: - 20–30% down payment at closing - Equal monthly installments over 12–36 months - Domain transferred to buyer at closing (with the registrar as escrow agent for some arrangements) or upon final payment For Domain Leasing arrangements where the seller retains ownership, escrow is used differently — it handles the monthly or quarterly payments while a separate legal agreement governs the usage rights. Legal documentation is strongly recommended for installment and lease arrangements. The escrow service handles the financial mechanics, but the contractual terms of what happens if the buyer misses a payment (domain returns to seller? grace period?) must be established in a written agreement between the parties. ## Escrow Fraud: What to Watch For Domain fraud frequently impersonates legitimate escrow processes. Key warning signs: **Fake escrow sites.** Fraudsters create websites that look like Escrow.com but are fake. Always verify you are on the real Escrow.com by checking the URL carefully and looking for the correct legal entity (Escrow.com Inc.) in the site's footer. Never use an escrow site that a seller suggests and that you have not independently verified. **Pressure to skip escrow.** Any seller who resists using escrow for a significant transaction should be treated with extreme caution. "I've done many deals without escrow" is not a valid justification for a payment method that has zero buyer protection. **Rushing the inspection period.** Sellers who pressure buyers to confirm receipt before the inspection period has elapsed are attempting to recover funds before the buyer discovers the domain has problems (deindexed, spam history, trademark issues). **Push-without-payment.** A variant where a fraudster transfers a domain to a buyer's account (a push transfer at GoDaddy-style "push" feature) before an escrow transaction is initiated, then demands payment directly. A domain appearing in your account does not mean you must pay outside of escrow. ## Protecting Your Investment After Transfer Once escrow closes and the domain is yours: 1. **Enable domain lock immediately.** Domain lock (registrar lock) prevents outbound transfers without your explicit authorization. 2. **Enable two-factor authentication** on your registrar account. 3. **Verify WHOIS.** Use WHOIS Lookup Tool to confirm your ownership details are accurately reflected. 4. **Update nameservers** to point to your intended hosting or Domain Parking service. 5. **Set up renewal notifications** well in advance of the expiry date. Some Domain Portfolio managers maintain a calendar of renewal dates to prevent accidental expiry of valuable acquisitions. ## Conclusion [[Domain-escrow]] is not optional infrastructure for valuable domain transactions — it is the essential mechanism that makes the Domain Aftermarket function at scale. The sequential logic (buyer pays, transfer happens, receipt confirmed, funds released) protects both parties while maintaining transaction momentum. Escrow.com, the industry standard, has processed billions of dollars in domain transactions with a reliable track record. Whether you are buying through direct negotiation, winning a domain at auction, or completing a broker-arranged deal, insist on escrow. The fee (typically 3–4% of transaction value) is a trivially small insurance premium against the catastrophic alternative of losing your entire purchase price. See Domain Brokerage: Buying Through Intermediaries for how brokers coordinate escrow transactions as part of the acquisition process. ## Frequently Asked Questions About Domain Escrow **Is Escrow.com the only option?** Escrow.com is the industry standard, but Sedo, GoDaddy, and Afternic all offer integrated escrow for marketplace transactions. For transactions originating outside these platforms, Escrow.com is the recommended independent option. **Who pays the escrow fee?** By convention, the buyer often pays the fee, but it is negotiable. Splitting the fee 50/50 is a common compromise in direct negotiations. Agree on this before initiating the escrow transaction to avoid friction. **How long does a domain transfer typically take?** For .com, .net, and .org, transfers typically complete within 5–7 calendar days after the auth code is accepted. Some registrar pairs transfer faster (24–48 hours). ccTLD transfers can take longer depending on the registry. The inspection period clock starts when the domain arrives in the buyer's account. **Can escrow be used for domain leases?** Yes. Escrow.com supports installment payment plans that suit lease-to-own structures. For pure rental arrangements (no transfer), escrow handles recurring payments while a separate legal agreement governs domain use rights.