Why a Winning Bidder May Become a Non Paying Bidder | DomainInvesting.com

Why a Winning Bidder May Become a Non Paying Bidder

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Just about every domain sales venue and platform has to deal with non-paying bidders on domain listings, sales, and auctions. It’s happened to me before and I am sure it will continue to happen to others as well. Frankly, it’s frustrating as hell when you reach a deal to sell a domain name and the buyer fails to follow through.

One slimy tactic I’ve witnessed and heard about are people who agree to buy a domain name (whether it’s at an auction, aftermarket venue, or private acquisition), and before paying, they try to sell the domain name to other companies. If they can’t find a buyer for the domain name at a profitable level, they don’t pay for their purchase.

I’ll share an example of this with you. Recently, I was involved in an auction at NameJet, and someone offered to sell me the domain name before the auction was over. The person ended up winning the auction but was a non-paying bidder, presumably when he couldn’t find a buyer. NameJet lost out, and someone who bought it to re-sell it likely lost out since this person probably reached out to many prospects already.

Recourse for the domain owner is generally limited to litigation and/or having that user banned from the platform in the future. Litigation can be expensive, so most people generally let it go without doing much of anything. It’s very frustrating to have a deal fall through, and it’s especially annoying to find out that the buyer has gone out to contact leads for your domain name, potentially hurting your chances of selling the name in the future.

In my opinion, trying to sell a domain name you don’t have the intention of buying unless you can flip it is wrong. If you are new to the domain industry, I caution you to not do this.


About The Author: Elliot Silver is an Internet entrepreneur and his company earns revenue from domain names. Elliot is President of Top Notch Domains, LLC, a company that has sold seven figures worth of domain names in the last five years. Elliot is the publisher of DomainInvesting.com. Read this blog's disclaimer for information about the publisher, comment policy, disclosures, and conflicts.

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Comments (36)

    Christian

    I’d expand on this to include “domain consultants” who contact businesses with a domain similar to one in an auction or about to expire.

    I was contacted by 2 Australian “consultants” who asked if I wanted to purchase a domain I knew was about to be released after expiration. I already had the domain on backorder and obtained it that way. But, to be contacted by dubious firms offering to sell a domain, which they have no guarantee in actually obtaining, is the lowest of low. What if I did enter negotiations for the purchase and they couldn’t follow through?

    I actually emailed these firms (after the domain was in my account) about their business practices. Needless to say, I haven’t heard back.

    February 8th, 2012 at 6:59 pm

    anon

    Frontrunning is totally standard whenever a big name hits the GD expiring auctions. The difference is, those clowns try to sell it for (X) before they own it, then use that as the basis for their risk-adjusted bid (allowing for the possibility that the verbally committed end user might back out).

    This is why other pre-release platforms started hiding whois.

    The real sharks are swimming around the big RGP names and frontrunning those. I’ve been contacted twice, offering to sell pre-release names closely related to adwords campaigns I was running.

    I could call out someone’s name here, but I won’t.

    February 8th, 2012 at 7:15 pm

    Samit

    The number of people using this tactic is frighteningly large.

    Been a couple of incidences discussed on NP & DNF, including the case where a TM owner sued the winner due to contact established by one of the bidders, who did not win once informed of potential tm conflict.

    Anyone who doesn’t own the domain or has written authority to sell a domain shouldn’t be doing so, but then that would put NameJet / Snapnames and Godaddy expired out of business too.

    February 8th, 2012 at 7:16 pm

    anon

    That should’ve read

    “…then use that as the basis for their risk-adjusted bid (allowing for the possibility that the verbally committed end user might back out) **or contact the owner direct and walk them through a redemption. **

    This is why other pre-release platforms started hiding whois.”

    February 8th, 2012 at 7:17 pm

    Elliot Silver

    “The real sharks are swimming around the big RGP names and frontrunning those.”

    @ anon

    Can you give more info about what this means (no need to call anyone out on it here)?

    February 8th, 2012 at 7:18 pm

    Acro

    This “domain broker” I blogged about at acro.net/blog/domains/bidding-at-namejet-the-domain-coyotes-den/ takes it one step beyond: contacts companies and alerts them to the auction, to bid on their behalf.

    And another twist: acro.net/blog/domains/dont-go-domain-bargaining-without-the-money/

    Frontrunners or hot air sellers are scum.

    February 8th, 2012 at 7:35 pm

    Elliot Silver

    @ Acro

    I agree it’s scummy.

    February 8th, 2012 at 7:37 pm

    Nadia

    I have heard of this happening, especially relating to an NP member who was fond of fast flips and was caught selling names while auctions were still going on. I don’t know why you’d want to alert someone of a name that’s out there when they could look up the WhoIs or get it themselves.

    I agree it’s shady, but I want to make sure I’m understanding it from all angles. How is the scenario that Acro described about someone bidding on someone’s behalf any different than brokers who do that at live auctions? Is it because someone has signed a contract with the intention to bid?

    Or the CamRoulette story from a couple of years ago? No offense meant to Adam S., who is wildly successful and DID purchase the name outright. But in terms of timing and what goes into a deal like that, someone so well-connected most likely has potential buyers in mind from the start. (“in mind” being key). No one would find fault with that, since the name was purchased. But I recall the original seller of the name felt it was unfair. He didn’t do his due diligence. I just find it interesting.

    In terms of buying from fellow investors, don’t we all run the risk of ending up with names that have previously been shopped around? Not everyone flips names within days of getting them, so it’s impossible to tell what sort of leg work has been done beforehand.

    I agree that non-paying bidders stink, and that nobody should have the right to sell something they don’t own.

    February 8th, 2012 at 9:14 pm

    Acro

    The hierarchy of scum:

    1. Non-paying bidders
    2. Front-runners
    3. Fake brokers
    4. Lowballers

    Feel free to add your own :D

    February 8th, 2012 at 9:33 pm

    jp

    I think it’s find to sell a domain before you own it but if you are going to do this then you must face the consequences in that if you get someone to agree to a sales price, then you have to buy it at NameJet or whatever even if it ends up costing your more than you sell it for. And if you are pretty sure you have a buyer on the hook so you win the auction at NameJet, but then your buyer bails, well then you still have to follow through and buy it at NameJet (or wherever). It’s part of the gamble you take with this business model. If you are good at this business model then you shouldn’t have too many problems. I’ll say it’s not my bag, but if somebody is good at it then good for them, just don’t go screwing over promises you’ve made. If you make a promise, then keep it.

    February 8th, 2012 at 10:19 pm

    Steve Trang - Phoenix Short Sale Realtor

    I always just assumed it was buyer’s remorse. I know I’ve bought domains and wondered WTH was I thinking? Of course, I did follow through with the purchase.

    February 8th, 2012 at 11:54 pm

    Ron

    This system cannot work, I see so many flaws in the namejet type front runners, if you make a sale before you pay, sometimes it can take end users weeks to pay, you will lose the domain for that, also sometimes end users agree, then back out, you will get stuck that way. You may close a few deals before you fall back into the same situation, I can’t see anyone staying in this business model for long, so I the issue will resolve itself, but these other idiots than send 10 emails a day about expiring domains, they are giving all honest domainers a bad name.

    February 9th, 2012 at 12:52 am

    unknowndomainer

    @Acro

    Lowballers are lumped in with non-payers and front runners?

    I’m pretty sure that even our esteemed host Elliot doesn’t run to domain owners and offer them fair market value.

    It’s different if we’re talking about super-low-balling a name from the hands of someone who doesn’t understand domain value. I often think of High Fidelity by Nick Hornby where the protagonist refused to buy an album collection at undervalue from a woman trying to screw an ex-husband – he respected the collection too much to underpay – I feel the same way about domain – getting a good deal and screwing someone without knowledge are not the same thing.

    The worst are those that find expired names and surreptitiously take them over. The owner of Limit.com for example died and the name has magically ended up in the account of a known domain stealer in the Seychelles.

    Ron

    The system does work. Even if the deal falls through you typically haven’t spent too much over fair market value – you have to be smart about it – it’s as anon said – it’s a “RISK ADJUSTED BID”.

    February 9th, 2012 at 1:12 am

    Ron

    Unknown Domainer, as we as domainers all know inventory builds up quickly, and as it does, so do renewals, and holding costs, not all end users complete deals, lots of flakes, and namejet, and snap, decent names do not come cheap these days, if your ten names in, to some solid keyword domains, you are looking at a decent 5 figures, many end users want to purchase domains, but are strapped for cash themselves.

    February 9th, 2012 at 2:52 am

    Dirk Lemmons

    Another tactic used is trying to sell expiring domains implying they own it but the non owner simply intends on purchasing it when it expires if I respond that I want it. I have purchased several domains after being offered the domain from a person that implies they own the domain but don’t. When I look it up I see it is expiring in a few days. I put in a back order and get the domain. If I had responded that I was interested in purchasing the domain from the seller they would have back ordered and then sold to me for much more than I could get it with a simple back order.

    February 9th, 2012 at 6:30 am

    Niklas

    How do you deal with non paying private offers.
    I had a 2k deal and then the person says he will finalize the deal when he comes back from his holiday. 1 week passes so i mailed him no reply. I know who the person is and i really wanted to sell the name so i could invest the money into my other sites…

    February 9th, 2012 at 7:55 am

    unknowndomainer

    @Ron

    If you’re 10 name in (failure to complete sale you’ve pre-organzed) then you obviously don’t understand risk-adjusted bidding and front running. If you’re doing it right you inventory should not be growing as rapidly as your turnover.

    Many of those who condemn a tactic operate on similar lines themselves. No one tries to buy high and sell low, do they. We all say it’s unethical to Sell High and THEN Buy Lower… but there’s a fine line between that and Buying Below Low market value and then Selling High to end users we know.

    The domainer dream is a good FLIP and most people will tell you it’s too hard to flip expiring/expired names so flip what? Domainers flip names they KNOW are being sold under priced and then sell them OVER PRICED.

    All pure domainers are low ballers. Brokers professionalize screwing both ends of the market. That’s reality.

    February 9th, 2012 at 8:00 am

    Rahul

    It not only happens while selling domain names but also with websites.
    I am a fulltime flipper and its really frustrating when the buyer don’t respond after the end of auction.

    February 9th, 2012 at 8:07 am

    dimensionfifth

    Short, brief and to the point. This is why I don’t get involved in many backorders, the x-owner probably made all the home work by contacting potential buyers who weren’t interested…and so x-buyer decided to drop.

    February 9th, 2012 at 8:26 am

      Elliot Silver

      @ dimensionfifth

      I don’t think that’s the case. I’ve flipped many names I bought at drop auctions – most of them fairly quickly.

      February 9th, 2012 at 8:28 am

    dimensionfifth

    @elliot
    I’m taking back my words :)

    February 9th, 2012 at 8:29 am

    Niklas

    But can you claim that he has to buy if he agrees on the price?
    it’s not like he signed anything but have all the email correspondance…

    February 9th, 2012 at 8:35 am

    Anthony

    There are a couple of separate issues that have to be dealt with here:

    Non payment -

    People should be banned from venues when they dont pay, that or they have to have money held in their account, as you can do with Namejet. Namejet T&Cs states that people will be banned from non payment so does GD, dont know if they follow through with this though.

    Frontrunning -

    Acro I read your article and I have read the article on NP on the guy front running there. These are two types of frontrunning.

    Typo or TM frontrunning (as in Acros blog) as far as I see is not a bad thing as it is likely only to prevent a squatter sitting on the domain anyway. That squatter would not approach the TM holder to sell as they would be smarter than that so the frontrunner in this instance isnt closing sales avenues should they lose the bidding.

    The frontrunning of generic domains is slightly different as the person will destroy avenues that the eventual winner of the domain may wish to pursue.

    Non payment is wrong and should lead to being banned. Frontrunning is a personal question that an individual must ask themselves if they are comfortable with. In relation to winning typos and TMs I think frontrunning is the lesser evil compared with squatting. The generic frontrunning, if you read the NP thread, can be very profitable. Some may see this as “slimy, underhanded” etc others will see this as clever.

    I do neither, but thought I would share my 10 cents.

    February 9th, 2012 at 8:47 am

    Acro

    Anthony, read my post again; the alleged tm’s are simply amateur estimates e.g. if example.com is auctioned on NJ and the frontrunning “expert” contacts ExampleSports offering to secure their “tm” or “brand” and bid on their behalf. For tm issues that’s where the WIPO comes in place.

    February 9th, 2012 at 9:22 am

    Romod

    I get these emails all the time from people “front running” the expiration. The topper had to be a domain I wasn’t planning on renewing last week that I got an email on asking if I wanted to buy it because it was soon to be made available to them. Scummy is an understatement.

    February 9th, 2012 at 9:32 am

    Gazzip

    “example.com is auctioned on NJ and the frontrunning “expert” contacts ExampleSports offering to secure their “tm” or “brand” and bid on their behalf. For tm issues that’s where the WIPO comes in place.”

    That is a blatant disregard for the guy who ends up winning and puts them at great risk of losing their recent purchase. Much worse than non payers.

    I have a six figure non payer at sedo right now, he’s been security checked, emailed, phoned and still no money.

    I really don’t mind if people change their mind because they found another domain but the least they can do is say so.

    February 9th, 2012 at 10:07 am

    Big Daddy

    I am sorry to be the bearer of bad news but, as I know from experience, fake bidders getting in the last bid happens all the time if there is no way to assure they have to pay. The last TRAFFIC require bidders to pre register and get qualified as having the money and being serious.
    Just sayin.

    February 9th, 2012 at 10:15 am

    Gazzip

    @Gazzip well i do mind if it’s winning bid, then i think they are obligated to buy the name.
    Not long ago a handshake was enough and binding now people seems to think that that they have the right to change his or her mind (all the time).
    This happened to me just a week ago a friend tells me he wanted to buy a mobile phone from me, he didn’t check the prices and when he comes back from holiday i tell him it’s worth $100 then he says “oh i changed my mind i found my old one is this ok….”
    now his friends is going to send it back to me 3 weeks after he “bought it”
    Next time i will write “All offers accepted by be are legal binding”

    February 9th, 2012 at 10:18 am

    Acro

    Gazzip – Exactly. Front-runners that do this trickery put the legitimate winner of an auction at unnecessary risk.

    February 9th, 2012 at 11:16 am

    Anthony

    Acro

    Fair enough with the example you give, I was thinking more along the lines of facebooks.com, yahooo.com etc

    For me offering a frontrunning service to the TM holder on these types of domains is the lesser evil.

    February 9th, 2012 at 11:34 am

    Gazzip

    Gazzip to Gazzip2 (who’s not me)

    A handshake or an agreement should be enough, but very often it isn’t.

    “Next time i will write “All offers accepted by be are legal binding”

    Sedo does that but unless you’re willing to back it up with legal action then its pointless.

    What I do hate is when someone gives you a crappy $60 offer at sedo and they leave it open for 7 days without taking two minutes to cancel it if they are not interested in your counter. That’s just ignorant.

    Please wait for buyer’s response

    ps, nice username Gazzip :)

    February 9th, 2012 at 1:19 pm

    Niklas

    I’m so sorry Gazzip, i wrote wrong name before because i was going to reply to you, but yes it’s a nice username.
    Yes people don’t tend to reply if the know your not going to sell at that price then they just go after next name. I guess some are lowballers to…

    February 9th, 2012 at 4:08 pm

    Gazzip

    No worries, I thought I was going senile and talking to myself ;)

    February 9th, 2012 at 8:30 pm

    LindaM

    Its funny because I was pondering this kind of thing earlier as I have a 5 figure ‘sale’ at sedo still awaiting payment.
    It struck me that you could put competitors out of the market for a week at a time on their best names.
    Just bid $100 on all of them, they will counter and you just ignore it. They’re legally obligated to leave the name dead in the water for 7 days and not sell it to anyone else.
    On the off chance they hit accept then awesome, you get a great name. Otherwise though, they wont be selling it to anyone for a week. Rinse and repeat. Across a whole portfolio that could hurt.

    Why is there a mandatory 7 day thing anyway, seems a bit excessive to me.

    February 9th, 2012 at 9:13 pm

    Glenn Madden

    I have been contacted by these clowns. One time I was interested in what they were offering for $300, went to GD and found it expiring, and purchased it through GD auction for $12. Great way to get advance notice of names I like, keep sending me offers.

    February 9th, 2012 at 10:22 pm

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