Is "Double Dipping" Acceptable? | DomainInvesting.com

Is “Double Dipping” Acceptable?

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I am interested in knowing your feedback about a topic I’ve discussed in private with a few people during the last few years.

“Double dipping” is where an intermediary (can be a broker or marketplace) takes a percentage commission from the buyer of a domain name as well as the seller, and each person believes he is the only entity paying the commission. Similarly, this can also mean the broker or intermediary is pocketing the difference between a buyer’s price and a seller’s offer, and taking a commission on top of this.

I want to share two hypothetical examples to illustrate what I mean.

  • A broker contacts me on behalf of a buyer and offers me $10,000 to sell ElliotsBlog.com to his client. I agree to the terms, which includes my paying a 15% commission. The broker also told the buyer he needs to pay a 10% commission for closing the deal, without mentioning that I am paying, too. Instead of making just $1,500 or $1,000 total on the buy or sell-side commission, the intermediary is actually making $2,500.
  • I list ElliotsBlog.com for sale in a newsletter or on an aftermarket site for $10,000. Later, I am informed that an offer of $8,000 was made, and I accept it. The intermediary tells the buyer that my price is firm, and he agrees to pay $10,000 to buy the name. The broker pays me $6,800 after taking my 15% commission from the supposed $8,000 sale and also keeps the $2,000 difference between what the buyer paid and what I thought the sales price was. In total, the “commission” was $3,200 instead of $1,500 on a $10,000 deal.

In both of these cases, the buyer and seller are willingly accepting a deal that’s presented to them, so it’s not entirely unacceptable since both parties agreed to the deals as presented. However, neither would likely be happy if they knew that the broker wasn’t presenting the full offer or was charging double commission.

There aren’t as many legal regulations on brokering domain names as there are with real estate, where this would likely be prohibited.

If the buyer and seller are both happy with the deal as presented to each, is there an issue with this happening? What are your thoughts on this type of thing?


About The Author: Elliot Silver is an Internet entrepreneur and professional domain investor. Elliot is President of Top Notch Domains, LLC, a domain investing company that has sold seven figures worth of domain names in the last five years. Elliot is the publisher of DomainInvesting.com.

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Comments (43)

    adam

    I once had a “buyer’s agent”offer me an amount for a certain domain. I knew who the buyer was so I contacted them and asked them what they were offering. They told me the number, conveniently enough the number was significantly lower than the number being presented to me. The buyer had to pay this company a fee already and then a commission. Who knows if the company was going to keep the difference and tell the buyer they got it for what the top price they offered. I told the buyer and he pulled the plug with this company.

    I think double dipping can be ok if both sides are aware and the broker is adding value to the deal on both sides. Clearly this is not the case.

    April 2nd, 2012 at 3:28 pm

    Scott

    Norm Brodsky addresses this question in his column in the April 2012 issue of Inc. magazine.

    April 2nd, 2012 at 3:40 pm

    John

    Elliot, there is a Goldman Sachs recruiter on line 1.

    April 2nd, 2012 at 3:54 pm

    Don Gillett

    Here’s how I see it. If you are a buyer or a seller and you find out that your “broker” is double dealing”, how are you going to feel? Are you going to have the same trust going forward? Are you going to want to deal with that broker in the future? I believe that you can make a kazillion dollars on a deal where you made the buyer and seller both happy IF you disclose exactly what you are doing. To pocket a few thousand dollars at the expense of a client is extremely short-sighted, and I personally would have nothing to do with it… just sayin’…
    domainerdon@verizon.net
    #domainerdon

    April 2nd, 2012 at 4:02 pm

    Seb

    If the broker can sell my domain for the price I want I don’t care what he makes.

    April 2nd, 2012 at 4:11 pm

    Richard Saperstein

    @SEB – Best comment of all!

    Capitalism: I’m all for it!

    The question to ask is: Are they doing anything illegal? If the answer is “YES” then it’s wrong, if the answer is “NO” then go for it.

    That’s the great thing about business. If you have a problem then find the buyers yourself instead of utilizing their services and time to sell your domain name.

    Are you really going to be mad if you ask for $3000 for a name and you get it?

    If the broker marks it up and sells it for $5,000k so be it. If I could of done it myself I would of, but I’m not, so pay your commission to the broker and be happy you pocketed the amount “YOU” originally asked for.

    This is my two-cents so take it for what it’s worth.

    April 2nd, 2012 at 4:42 pm

      Elliot Silver

      @ Richard

      Thanks for the feedback. I’ve heard people with differing opinions and think it’s a good discussion to have.

      April 2nd, 2012 at 4:43 pm

    Ron

    The question has to be asked is the sole purpose of the broker to get the most for his client, or simply sell the domain for the lowest amount the seller will accept, different between the worst, and the best.

    With the free flow of information, numbers do get out, and I think if a broker is doing this, once their rep is ruined, they are out of business, so I would hope none practice in this way.

    April 2nd, 2012 at 4:51 pm

    rob sequin

    It is VERY clear. A broker can only have one master.

    As a broker on LOTS of deals, I never “double dipped”. It is not only immoral but not logical.

    Any broker should be 100% loyal to the buyer OR the seller.

    The broker ALWAYS works in favor of the best interest of the client and the client should be the only one paying the broker. If a broker is taking any money from the other side, I would think that to be almost treasonous.

    The broker can assist the other party with the domain transfer or maybe even act as an escrow agent but should never take a commission or any payment from the other party.

    April 2nd, 2012 at 5:10 pm

    Elliot Silver

    @ Rob

    What would you do if someone contacted you and asked to buy XYZ.com on their behalf. You would ask what their offer is, and you would likely try to get them the best deal and offer less than the max offer assuming the domain owner says “no” to the opening offer.

    However, if the owner does say “yes” and there’s a gap between the price the buyer is willing to pay and the sales price that was agreed upon, how do you handle the difference?

    April 2nd, 2012 at 5:12 pm

    Mike

    HELL YES IT IS WRONG!!!!!!!!!!!!!!!

    These domain brokers are not buyer or seller agents, they are agents for themselves.

    The domain industry if full of slimy, greedy domain broker pigs that have NO interest in ethics.

    Only about 10% are trustworthy.

    Just spend ten minutes talking to a handful of them and if you have any sense of personalities you can smell the rat in them.

    Bob Olea is my pick for a clean operator.

    I wish this industry would come clean on this. The brokers are not forthcoming about who they are working for.

    Why the f*ck would anyone want a broker representing both sides, or culling off both sides? I’m sorry, but some of these responses above sound like brokers chiming in. I have never heard anyone talk like that about brokers until now.

    April 2nd, 2012 at 5:13 pm

    Richard Saperstein

    @Mike

    I’m far from a broker and I see nothing wrong with a middle man making a profit.

    The problem is the language between the two parties. If it’s defined and one of the parties breaks that obligation then I have a problem.

    If I tell the broker I want $5k for the domain and he gets me that why do I care what he profits? If you have a problem with them trying to sell it for a higher price then sell the domain yourself. Find the buyer, put in the negotiating time and resources and make the profit for yourself. Funny thing is you still would only make $5,000. So really what is the big problem if the broker makes more.

    April 2nd, 2012 at 5:27 pm

    rob sequin

    I think you are asking me what I would do if someone asks me to be a buyer broker for them?

    If that is the case then this buyer is my client and will pay my commission if I am able to buy the domain for him/her.

    We talk about the details and agree on a max purchase price, contingencies, time frame, other decision makers involved etc then I get them under contract.

    My commission as buyer broker is half the difference between the max budget and the actual purchase price.

    Example: Client wants me to buy a domain for $10k and we agree that amount is a reasonable max purchase price. I am able to buy the domain for $6k.

    The difference is $4k. My commission is $2000 from the client/buyer.

    S/he pays $8000 for the domain and I made $2000 commission.

    April 2nd, 2012 at 5:28 pm

    Larry

    The only reason this is even a question is because there is an intermediary involved and that person has a reputation and expects to get future business. So they have to be honorable or it will impact future business and/or referrals.

    It is quite common in business and certainly in domain sales (as well as car sales) to outright lie and bullshit.

    The problem only arises when someone gets caught.

    Personally if I was selling a domain and offered a commission to the broker and they also made money on the other end it wouldn’t bother me (in general).

    April 2nd, 2012 at 5:31 pm

    Peer

    Hi Elliot,

    In RealEstate atleast in New Jersey double dipping is allowed in commission part. Though the term they refer is Disclosed dual agent and they do get commission from both sides and i think few aother states also allow this type of commission structure.

    The 2nd scenerio is totally illegal in real estate in the US.

    April 2nd, 2012 at 6:15 pm

    Kevin M.

    A brokers job, unless specified differently upfront, is to put together a deal for two interested parties, not to get them the ‘best bargains’ they can find for them.

    I took a Tom Hopkins sale seminar a long time ago, and the one thing I got from him on selling or buying an item is exactly what you noted – “If the buyer and seller are both happy with the deal as presented to each – it’s a good deal!”

    It doesn’t matter what the product is, be it domains, houses, or sugar, as long as nothing is signed and/or noted prior to what terms and conditions of brokers fees and limits are, what the broker makes is in material to the buyer or seller. They both got what they wanted at the prices they where happy with to sell or buy.

    April 2nd, 2012 at 6:34 pm

    rob sequin

    @Kevin M.

    “A brokers job, unless specified differently upfront, is to put together a deal for two interested parties, not to get them the ‘best bargains’ they can find for them.”

    I couldn’t disagree more!

    If you are committed to doing a deal you are only committed to your commission.

    A broker should always work 100% for the best interest of his client and sometimes… many times, that means no deal because that is in the best interest of the client, not the deal.

    As far as some comments above about scummy brokers, most I know are very good at their jobs. I only had one bad experience in many years and many deals.

    People might not like domain brokers because we turn down WAY many more opportunities than we accept but doesn’t mean domain brokers are not good.

    April 2nd, 2012 at 6:46 pm

    Don Gillett

    This is a great topic for discussion. My initial reaction to some of the comments is that there is a fair amount of people in our industry that have no compunction against making a windfall at their clients’ expense and who feel no obligation to deal fairly and transparently with their business associates. Hurray for those who see the long-term implications of dealing fairly and justly, getting permission in advance, fully disclosing their dealings with complete transparancy. Most sellers of domains are out to get the highest value for their asset. A broker that profits at the expense of their client is dishonest if they don’t have permission in advance and don’t fully disclose such a practice. No wonder some of the Yahoos in this business are giving the rest of us a bad name. Shame on you!
    Don

    April 2nd, 2012 at 7:09 pm

    Eric Borgos

    I had a multi-million dollar website deal several years ago where I was the seller, and after the sale I found out my broker also got a buyer’s agent fee. Neither the buyer or myself knew the broker was double dipping.

    The negotiations took several weeks and the broker played a big part in it, so I was upset about this when I found out, because I had assumed he was representing only me and trying to get me the best price. In the end there was a bidding war between his buyer (who I eventually sold to) and a buyer I found myself (with no commission to the broker), so the price kept going up, and in the end I don’t think the broker had much influence on the price, but if I had not found another bidder I might have sold at a lot lower price, and then I would have been upset at the broker once I found out he was also representing the buyer.

    Had he disclosed ahead of time he was double dipping, I would not have had any problem with it.

    April 2nd, 2012 at 7:16 pm

    Bob Olea

    @Mike – Thanks for the kind words! PayPal to the usual account? ;)

    @Rob – I’ve known other people that have successfully used that same buyer formula (splitting the ‘spread’). I don’t think buyers have any issue with that, mostly because it’s DISCLOSED and AGREED TO up front.

    The key is to always be transparent, and to err on the side of the client. Sounds like you do that well.

    @Eric – That dude sounds like one of the weasels mentioned by a few people earlier. Too bad you didn’t name who it is! If he did that to me I’d have no problem outing him. There’s nothing wrong or libelous about telling the truth.

    Secret double dipping – VERY unethical and dishonest IMHO! There are so many opportunities in the domain space that there’s no need to be a greedy little pig! Get caught doing something like this and you end up trashing your rep. Not a good thing to do in this (or any) business…..

    April 2nd, 2012 at 8:56 pm

    Kevin M.

    @Rob
    I believe we are talking about two different types of brokering situations. You’re referencing representing ‘one client’ and their interests. In fact one can’t represent two clients ‘best interests’ (a buyer and a seller in a dealing), without having the interests of one more-so than the other, as one would want pricing to go up, and the other would want it to go down. Leaving a broker with two friends, but no commission. So yes, when you represent ‘one’ client and the terms you agreed to, you are only committed to your agreed upon commission.

    That’s different than repping a sale of ‘item’/domain, with two parties wanting someone for such. When someone approaches a broker to get them a sale at their criteria, that broker has to find a buyer willing to match that criteria, and if not, to work it out for both parties to agree to. And if there’s a difference in what the two are willing to agree to, is where the part of “If the buyer and seller are both happy with the deal as presented to each – it’s a good deal!”

    It’s not underhanded, or unethical, it’s business. For instance, if a client (not talking long term or steady clients here) came to you with $20K to buy them a name, and the seller surprised you and said they’d sell for $4K, would you feel compelled to tell your buyer you could get it for $10K, as it’s in their best interest? Or tell the seller you could pay them $18K as it’s in their best interest? Would you consider yourself unethical for not getting more from the seller and less from the buyer? There was a content purchaser, and a content seller. And, in this scenario, a more content broker.

    Of course ‘everything’ is based on what terms are laid down and agreed to upfront.

    April 2nd, 2012 at 9:04 pm

    Adam

    Real estate agents in many states can “double-dip” but it is also banned in other states. If the agent has a listing and they get a new buyer who happens to like that listing, as long as a disclosure is made they can represent both sides. Here’s an older article on the topic : http://jscms.jrn.columbia.edu/cns/2007-05-08/cahall-doubleagents.html

    It’s much easier to avoid any possible questions/problems and just work the deal on one side.

    April 2nd, 2012 at 9:59 pm

    Jp

    If its not full disclosure to everyone and someone finds put might leave a bad taste in someone’s mouth and this broker may loose traction and clients. To me seems shady but I say let the market decide.

    April 2nd, 2012 at 10:35 pm

    Irene Conde

    Bottom line, it’s all about sales! If you’re a broker, you’re a salesman. As long as each party is happy, that’s it. It’s business.

    April 3rd, 2012 at 2:39 am

    Mohammed Sameeruddin

    This is clearly the breach of trust. The seller will never contact the broker again if he knows that he is closing the deal in higher amount and keeping the rest of the amount in his pocket. In long run the broker will be out of business.

    April 3rd, 2012 at 4:23 am

    Stian Eng Holtet

    That is just greedy and shady. When I broker names I charge the seller the fee we’ve agreed upon and the buyer is charged whatever he/she has agreed to pay for the domain.

    April 3rd, 2012 at 5:37 am

    Craig Edmonds

    it only seems “shady” because the buyer and seller dont feel they should part with cash.

    This kind of makes them a bit greedy too.

    Its not about ethics or morals, business is business.

    Customers can choose or not choose to do the deal.

    April 3rd, 2012 at 6:29 am

    M. Menius

    Double dipping, or dual agent, is ethically wrong unless it is fully disclosed to both parties. The broker’s role is to represent primarily one person’s interest and the business relationship is based on trust and honesty.

    It could contaminate future negotiations if a broker took your stated sales price, and then added more on top of that without your knowledge or permission in an attempt to garner more profit for themselves. That’s very dishonest. He or she is representing you and they could do damage to your reputation if they operate with their own private terms without your consent.

    April 3rd, 2012 at 7:33 am

    Spencer Haley

    All that matters is what you agreed to. If I want to be a domain deal matchmaker – and find people with domains, and then find people that want domains, and then only connect them if I am paid the price I set – then I am NOT in the wrong to do so.

    The only way it would be wrong is if I misrepresented how I was doing business.

    Remember, you can run your business any way you want, and customers will vote or not-vote for it with their dollars. If I want to keep my clients, both buyers and sellers, in the dark about what fees I am charging the other party, then it is unquestionably my prerogative.

    April 3rd, 2012 at 8:01 am

    Ose

    Double dipping is okay if it is not illegal.
    The broker is probably bringing his network
    and goodwill to bear on the deal which cannot
    be quantified as it is a relative issue in
    accounting.

    If either party is satisfied with the deal
    from his or her own side, it is a good deal.
    Period!

    April 3rd, 2012 at 8:33 am

    Danny Pryor

    In a word, “No.” The Seller should pay the commission only, as the incentive to the broker to sell the name on their behalf. The buyer, if they wish, may hire a broker to represent them, and in such an arrangement the buyer will pay a brokerage fee. But the intermediary selling a name can not represent both parties, as it’s a conflict of interest.

    This is plain business ethics. I’m surprised at many of the responses on this page.

    April 3rd, 2012 at 8:58 am

    Danny Pryor

    Sorry to “double dip” myself, but I wanted to add to my comment. In the scenario presented, I would regard such an intermediary as being unethical and regard their tactics as borderline criminal. That’s my opinion only, regardless of what the law might say.

    April 3rd, 2012 at 9:02 am

    Chip

    Anyone who thinks this isn’t at the least unethical and more likely borderline fraud needs to check their moral compass. The key part of the question was “…each person believes he is the only entity paying the commission”

    I have no problem with brokers making a lot of money off deals (GoDaddy 30%, some auction houses with similar rates) but to do it behind the backs of the buyers and sellers demonstrates that they have something to hide. Downright slimy.

    For all these folks saying “If both parties are happy, what’s the harm?” The harm is taking advantage of people who have put their trust in you. SO is it ok to fleece an old woman or someone uninformed because they don’t know any better? Give me a break and grow up. You should be ashamed.

    If this industry wants to move into the next level of respectability, these type of practices need to be stopped and as participants in the industry we should demand a higher level of ethics and professionalism.

    April 3rd, 2012 at 9:13 am

    Mike

    Many of the posts that are pro-double-dipping are brokers ; They just have to be. Who would be so stupid to say such things?

    It’s not as clean as some say. What if I quote 10K on a domain and the broker sells it for 40K? Should he get 30K?

    Also, what happens if the potential buyer gets turned off by this 40K offer and you lose him as a prospect? He might have easily paid 10K.

    Any broker doing this IMO belongs in jail. Just like Danny Pryor above said, who cares about the law, it’s criminal in our minds.

    Maybe we should start a reference site outing domain brokers that double dip and revealing and commending those that don’t.

    It would be so easy for someone to put together.

    April 3rd, 2012 at 9:25 am

    Jeffrey Gabriel President of DomainAdvisors

    Elliot,

    You definitely pose some great questions, and many people have left some interesting comments. At DomainAdvisors we pride ourselves on full transparency in the sales process. When someone enters into an exclusive agreement to sell a domain name we layout all of the terms, and the commission that we charge.

    When a sale occurs there is a section in our agreement that spells out who is paying the commission and the amount being paid. Making it clear to any brokerage that these terms must be laid out in the agreement is not an outlandish demand, and I would require it as a consumer.

    There are cases that double dipping does occur when the buyer and seller agree to split the commission, but again that is fully documented and transparent.

    As a seller I would make sure that these terms are requested up front prior to signing an agreement, and that buyer, seller and broker are all on the same page when executing a purchase and sale agreement. If you are potentially selling an asset valued in the thousands of dollars spend the 200-500 dollars and have a reputable attorney review the contract.

    Furthermore, asking a broker if they are an agent for the seller, the buyer or a duel agent representing both sides is also a great question to ask. If they are an agent for the seller, and YOU are the buyer then their fiduciary responsibility lies in finding the best price for the seller.. Obviously not themselves.

    My best advice: 1. Ask questions. 2. Call a lawyer. 3. Get everything in writing signed by all parties.

    April 3rd, 2012 at 10:16 am

    Dominick Savillo

    I have mixed feelings about it. If someone brokers a domain for me and I received the price point I was seeking I would be happy. It would be a win-win situation if the broker marked it up and made a nice profit then good for them.

    That’s great, when looking at this one case at a time, but how about overall? How about the domains that did not sell?
    Was the marked up pricing the main reason the others did not sell?

    My real concern is this – Is the broker really working for me in this case? Would I get more sales through this broker if the domains where not marked up to a higher price?

    I would expect a broker to market a domain for me at the price level I was asking for since that is what we agreed upon. Now if the broker stated I think I can get more for you than your asking I would make an agreement to pay a larger commission if they succeeded.

    Proper disclosure is the real question here. Is your broker really working for you? Does he or she really have your best interest?

    April 3rd, 2012 at 10:52 am

    Ernest C. Seymour III

    While I don’t think that it is technically illegal it is just not ethical to be representing someone while having a vested interest on both sides of the deal. When you take a contract on a domain you should be shooting to maximize the sale of the property for both your client’s sake and your own.

    April 3rd, 2012 at 11:16 am

    Michael

    on the notion of double dipping itself (first time i’ve heard of this) it seems pretty suspect to me. the ‘proof’ of its questionability is in the necessary lack of transparency. if there’s nothing wrong with it, why the need to keep both sides in the dark about what the other is doing?

    secondly, in your first scenario, if the buyer contracts the broker to acquire a domain/property that you as the seller had never advertised, it also doesnt seem right that you would pay the commission on the seller side – especially given you don’t even know or suspect that the buyer is paying a commission as well, … so its like “you come to me to buy my website on behalf of your client and *I* have to pay your commission? … lol … either pound salt or add your 15% to the sale price” would be my reaction as a seller. In that case the broker is then double-dipping out of the buyers pocket by forcing the higher sale price since they want to take a cut on both ends.

    as for your second scenario, i call that skimming off the top.

    Finally,

    April 3rd, 2012 at 11:34 am

    JamesD

    Unless buyer and seller are aware, I’d regard it as sharp practice.

    April 3rd, 2012 at 1:04 pm

    Chris

    There’s a reason why Real Estate has a pretty will defined set of guidelines, legal paperwork, and best practices for brokers. It’s a mature industry that has been put through the paces with the legal system.

    The domain industry is not there yet. There’s still a lot of Wild-Westing going on, not only with buyers and sellers, but also with brokers – “double dipping”, claiming exclusivity, etc. We have some great brokers in the domain business (you know who they are), but for every one of them, there are ten that dabble in the dark art of knavery. When the misrepresentation lawsuits start flying in a few years, the boiler-plate contracts and industry standard guidelines will follow.

    The bottom line: Brokers, whether it’s domains, real estate, or any other commodity, should be explicit about who they are representing, what commission they are taking and if they are getting a piece of the action.

    April 3rd, 2012 at 5:22 pm

    Fred Tappan

    One Master at a time for me. The bank offers both real estate sales persons a $1000.00 bonus if they get the sale done so my Realtor ends up working for the seller and me the buyer. I question why doesn’t the bank give me a $1000.00 discount? Can I really trust my Realtor? Maybe this price inflation is what helps markets to be over priced and then crash and burn.

    What about fairness and honesty? Maybe why I’m still trying to get into the middle Class. I’m too honest but at least I have clear heart. I don’t want the guilt for not being honest in my heart I would at least want to tell the seller what I did.

    April 3rd, 2012 at 7:39 pm

      Ryan O

      Its the name of the game. You just have to be smart enough to recognize and save your own deal. You can not really know the middle man for trying to profit.

      but also I do not believe the buyer should have to pay anything if they are smart enough

      October 16th, 2012 at 2:04 pm

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