How Do You Confirm Financial Fitness?
For many of us, getting a high 6 or 7 figure deal on a domain name is exciting and helpful to our business. Unfortunately, just because a prospective buyer agrees to pay a high price for a domain name does not mean he or she will be able to follow through with that deal and fund escrow.
Let’s say you are negotiating with a prospective buyer. After negotiating for a period of time, the prospective buyer offers $800,000 for a domain name, and you’re willing to sell your domain name for that price. How do you qualify the buyer to:
1) Ensure that payment will be made promptly.
2) Not permit the prospect to try and find a buyer at a higher price.
During the course of a negotiation, I try to qualify the prospective buyer. It doesn’t make sense to spend a significant amount of time negotiating a deal when the buyer doesn’t have the means (or corporate approval) to pay a high price. I try to look at a variety of publicly available tools to try and confirm financial fitness, but this is not always easy or accurate. If inaccurate, it makes the whole effort pointless.
It can be difficult to qualify many buyers. Some of the largest buyers and their agents use various tactics to stay anonymous. They may appear to be a ghost with zero domain names owned and no Internet presence, but in reality, they are a massive company with a virtually unlimited spending limit. Anonymity makes it almost impossibly to privately pre-qualify them for a large purchase.
I try to look at things like their business background, fundraising success, domain names owned, address…etc to see if I can ensure they will be able to afford a domain name. Obviously, this is not ideal. One time I asked a prospective buyer how he would be able to afford the purchase, and he was very offended at the question. I don’t want to be intrusive, but I also don’t want to agree to a nice deal and end up having it fall through.
So… how do you confirm financial fitness before agreeing to a large deal?
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