Escrow is an account or service hold by an independent, trusted third party in a transaction process on behalf of transacting parties. You can use escrow for domain names, website development, custom programming, or any other intellectual property matter.

In a domain name escrow, an independent, trusted company acts as a third-party agent in the selling-buying process. The escrow agent connects the buyer to the seller, and ensures that both parties receive exactly what was agreed to before the purchase. In other words, the buyer will only receive the domain name once the seller has paid the escrow. And the seller will only receive the compensation for the domain name once it has been transferred to the buyer.

The third party escrow agent will not only collect and disburse funds, but will also verify domain name ownership prior to the transaction, collect documents or other important materials from the seller, and execute the agreement based on contractual prerequisites.

 

A price comparison of domain name escrow services:

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Escrow.com

How it works: Buyer and seller agree to a transaction online. Buyer and seller agree to the terms outlined in the online agreement. Buyer sends payment to Escrow.com escrow account. Seller receives a prompt that buyer has paid, and seller is instructed to transfer the domain name. Buyer and seller need to discuss whether the name will be pushed to buyer’s account at the registrar or whether it should be transferred to another registrar of buyer’s choice. Seller then confirms that the domain transfer was initiated. Buyer then confirms that the domain was received to begin an “inspection period.” Buyer then accepts the “merchandise” to inform Escrow.com the transfer was completed and funds should be disbursed.
Transaction fee: 3.25% of sales price up to $5,000 (with $25 minimum), $162.50 plus 0.26% of amount over $5000 for transactions up to $25,000, and flat 0.89% for transactions over $25,000.
Funding charges: Wires are free, credit card and PayPal up to $5,000 accepted on Premier Service level at additional charge, check/money order accepted on some transactions with $2,000 limit.

Sedo
Transaction fee: 3% of sales price. If the domain is listed with Sedo, you have to pay full commission.
Funding charges: No fee on wires, credit card up to $500 with no charge, PayPal up to $5,000 with 3% fee if amount is over $500.

Godaddy

Domain Buy Service -- Transaction fee: $69 + 10% of sales price,paid by buyer.
Auction -- Transaction fee: 10% of sales price,paid by seller.

Afternic
Transaction fee: 3% of sales price.
Funding charges: checks are free, credit card or PayPal are 4%, US wire $15, international wire $25

 

Reasons for Using Domain Name Escrow

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Domain name escrow is employed because it is the safe way in online transaction of a domain name. This employment ensures a buyer that a domain will be obtained and on the other hand the seller will be paid. In other words, when the seller and buyer do not know each other, it is a system that they can trust to protect their online investment. Although different escrow company will apply different service, in general, the following is the detail of benefits for the buyer and seller.

Domain name buyer escrow benefits include:

Security: Since the money is hold by the escrow company, there is very little opportunity for the buyer to lose the money without getting the domain name. Additionally, the buyer feels secure because details of credit card or other financial information are only disclosed to a trusted institution.

Assurance of a Domain: Once the buyer sends the money to the escrow company, the company will inspect and notify the seller to send the domain name. Therefore, the buyer will be able to confirm domain ownership before disbursement.

Convenience: A buyer can use various method of payment like Visa, MasterCard, Amex, Paypal, check or money order. An escrow company will provide quality customer suppor; you can reach them by phone or email.

Domain name seller benefits include:

Security: Before transferring the domain, the seller will obtain payment verification. Therefore, the seller is also protected against credit card fraud, lack of funding or credit card chargeback. The escrow company will disburse the money once provisions are met.

Convenience: The seller can choose various methods to receive the payment. In addition, the company will also provide access to customer support via phone or email.

 

The Process of Domain Name Escrow

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In general, the process of domain name escrow involves collecting the money, pushing the seller to transfer the domain name to the buyer and disbursing the money to the seller. However, there are also companies which hold both the money and the domain into a holding account to prevent the seller receive the fund without domain name transfer. The following is the general process of a transaction using the domain name escrow.
1.Agreement between Buyer and Seller
After registering with an escrow company, both parties should agree to the terms of transaction which basically involves price, domain name, method and date of payment.
2.Payment to Escrow Company
The buyer transfers the money to the escrow company using approved payment method. Once the payment is confirmed, the company will notify the seller to transfer the domain name. In some cases, the seller has already transferred the domain name to the escrow company.
3.Domain Name Transition
The escrow company will prompt the seller to work with the buyer and registrar to change the domain name ownership. Different procedures apply to different registrars.
4.Confirmation of Domain Name Ownership by Buyer
Once the buyer confirms the domain name ownership, the escrow company will inspect whether WHOIS information reflects the buyer’s profile.
5.Disbursement of the Money to the Seller
After the escrow company inspects, checks and verifies that the domain name has changed ownership, the seller receives the money and the transaction is complete.