Don't Assume Brokers Do Due Diligence | DomainInvesting.com
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Don’t Assume Brokers Do Due Diligence

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Most of the top tier domain name brokers are buttoned up and trustworthy. I would say this is the case for the vast majority of the best brokers. Tessa Holcomb from Igloo.com operates one of the top brokerages and she made a good point on Twitter yesterday:

When buying a domain name via broker, the buyer still needs to perform the critical due diligence that is required of any domain purchase. Most domain brokers know their clients, but some likely don’t check the complete provenance of a domain name. Many brokers do proper due diligence before representing a domain name, but sometimes their good clients may have inadvertently acquired a domain name that isn’t “clean.” It is possible that a domain name is not rightfully owned by the seller, and the broker may not even realize it.

On most transactions, the contract (if one is even used) is between the buyer and the seller. This may mean that the broker has no legal obligation to the buyer should there be an issue. Of course there could and likely would be reputational damage to a broker who has brokered a stolen domain name, but it might not mean much to a buyer if the domain name is taken back or if there are any legal troubles in the future.

There are many trustworthy and exceptional domain brokers in the domain business, but it is always important for the buyer to perform due diligence rather than assuming the broker did it.


About The Author: Elliot Silver is an Internet entrepreneur and publisher of DomainInvesting.com. Elliot is also the founder and President of Top Notch Domains, LLC, a company that has sold seven figures worth of domain names in the last five years. Please read the DomainInvesting.com Terms of Use page for additional information about the publisher, website comment policy, disclosures, and conflicts of interest.


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Comments (5)

    Andrea Paladini

    As far as I know, many of the so called “top brokers” not only don’t do a proper due diligence on the names they are working on, but sometimes (I should say more and more often) they even classify as “exclusive” names they don’t actually have under exclusive.
    Without mentioning those who literally try to scam you, proposing abnormally low prices for your premium names to favor friends, particularly other buyers/domain investors …
    When I say “exclusive” I mean a signed brokerage agreement (also an email agreement if the owner doesn’t want to sign a paper version).
    No offense, but talk is cheap, and marketing stunts even more. :)
    Always glad and thankful that is not the way we work, an in-depth due diligence (I’m an equity analyst) is always the core of any of our deals, brokered or not.

    January 4th, 2017 at 3:10 pm

    Kevin

    One other consideration to always be aware of which I’ve come across several times over the years is with names owned jointly by 2 or more business partners, or a group of investors, and names owned by a husband and wife going through a divorce.

    Some business partners have informal deals together, for example where one of the partners may be more technically proficient and that partner registers names under his registrar account without including the other partner’s name on the Registrant record. If the partnership goes bad, one partner might try selling the domains without notifying the other partner.

    With investor groups, same thing, usually one individual in the group handles things and may just put his name and contact info on the registration.

    I’ve dealt with husband and wife divorce disputes as well. And like above, most married guys will reg a name under their name only and not with both the husband and wife names together. I’ve dealt with situations on both sides, where a husband was trying to sell marital assets during a nasty divorce as if the domains were his asset, since his name was the registrant, and the wife found out and contacted me saying the domains were all half hers and she wanted the sale cancelled.

    It would be interesting to do a poll to see how many domainers buy and sell names in consultation with their spouse and list their spouses name on the registration also. I don’t think many do.

    January 4th, 2017 at 3:20 pm

    Bill Hartzer

    There are plenty of good names that have sold–but then the buyer went to build a site on it they found it had been trashed. For example, the name had a really bad link profile, had adult content on it (when it wasn’t an adult-related domain), was banned in the search engines, or even on email blacklists.

    You definitely need to do your due diligence if you’re going to actually develop a domain.

    January 4th, 2017 at 4:22 pm

    Tessa Holcomb

    Thank you, Elliot. Igloo takes due diligence very seriously. While there are many trustworthy and exceptional domain brokers, there are, unfortunately, some are more interested in making a quick commission than focusing on trustworthiness, integrity and long-term relationships. We have seen more and more situations lately where domains featured in sales newsletters are not only “unverified” but were listed without the owner’s approval! This practice of “fishing” is unethical and can even hurt the value of the domain or worse, a potential sale in the works by the broker who does have the name on exclusive as many buyer’s see this as an attempt to “shop” their offer. Buyers (and sellers!) should be doing their due diligence on the broker they choose to work with and not just the name they are buying.

    January 4th, 2017 at 11:05 pm

    Domain Host

    I’ve seen a lot of domains that were being sold with big price tags and touted by the broker as a great buy. But lots of problems were found with a little research – adult content, spam, black list, etc. It’s always important for the buyer to perform their own due diligence.

    January 7th, 2017 at 12:29 pm

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