(by Tony Blessed, Epik Escrow Manager)
Escrow is a tool that is provided by a third party entity in the event of an asset purchase. In a domain name escrow or digital property escrow, when a buyer has made an offer, and a price agreement has been reached with the seller, the agreed cost is communicated to the escrow intermediary through raising an escrow ticket (e.g. see escrow.epik.com) or by opening a domain name escrow account for the said transaction with the escrow agent. Escrow provides security to the buyer and seller that the assets being exchanged are secure and will be owned by the buyer after contractual agreement have been fulfilled by both buyer and seller.
Reasons why Escrow is important;
In the fast growing market for digital assets, there are many entities that are engaging in illegal and fraudulent transactions. A reputable escrow agent is the safest way to complete an online transaction. This assures a buyer that the assets being acquired will be obtained. At the same time, the seller has assurance that they will be paid. This also works in the common case where the seller and buyer do not know each other.
Benefit to a Buyer of using Escrow
Safe and Secure Transaction: Since the purchaser’s funds are held by the escrow agent, there is little “counterparty risk”, i.e. where the buyer could lose funds without getting the assets. Additionally, the buyer has peace of mind details of their personal identity, payment method, or other financial information are restricted to those who need to know this information for the purposes of completing the transaction.
Transaction Assurance: Once the buyer sends the money to the escrow agent, the escrow agent will verify and notify the seller and arrange for the asset to be released to the buyer. Therefore, the buyer will be able to confirm domain ownership before disbursement.
Convenience: A buyer can often use or combine various methods of payment like Visa, MasterCard, TransferWise, Cryptocurrencies, Paypal. The escrow agent will also provide quality customer support to attend to questions and concerns in the course of starting the escrow transactions. This can be particularly helpful in cases where the seller is from a part of the world that is unfamiliar to the buyer.
Escrow Benefit to a Seller
Safe And Secure Transactions: Before transferring the asset, the seller will obtain payment verification. Therefore, the seller is protected against payment fraud, or credit card charge back. The escrow company will disburse the money once the conditions of the sale have been met. In cases where there are multiple assets such as social media handles, or website assets, this is particularly helpful.
Convenience: The seller can choose various methods to receive the payment. In addition, the escrow agent will often provide ongoing transaction updates and/or access to customer support via phone or email.
How To Start A Domain Name Escrow Transaction
The typical process to escrow are as follows:
Agreement between Buyer and Seller
After registering with the escrow agent, both parties agree to the terms of transaction: asset description, price and, and method and date of payment.
Payment to Escrow Company
The buyer transfers the money to the escrow agent using approved payment method. Once the payment is confirmed, the escrow agent will notify the seller to transfer the asset. In some cases, the seller has already transferred the asset to the escrow agent.
Escrow companies will prompt the seller to work with the buyer and transfer the assets. Different procedures apply to different assets such as domain names, social media handles and website assets.
Confirmation of Domain Name Ownership by Buyer
Once the buyer confirms the asset ownership, the escrow agent will verify the change of control.
Disbursement of Funds
After the escrow agent inspects, checks and verifies asset has changed ownership, the seller is disbursed the funds and the transaction is complete. There is typically a closing statement issued by the escrow agent.
There is a special case where a transaction is initiated by a domain broker who is neither the buyer nor the seller but is a facilitator of a transaction. In some cases, a broker is arranging for a two-sided transaction where buyer and seller see different prices. In this case, special coordination is required so that the final buyer receives their expected asset at their expected price, and the original seller receives their expected proceeds.