Pros and Cons of Domain Broker Exclusivity
Most domain name brokers require an exclusivity agreement before they begin to sell a domain name. The agreement protects them from getting screwed if a domain owner sells a domain name that they have agreed to broker. It also requires that the owner agree to a commission during a period of time, whether or not the broker closed the deal.
In the past, I found myself torn when deciding on giving a domain broker an exclusive listing for one of my domain names. Having to pay a commission regardless of if it was earned is less appealing to me, but there are plenty of benefits to an exclusivity agreement.
I’ve had a number of discussions with domain brokers and investors regarding exclusivity, and I can respect a broker’s need for exclusivity. Here are some pros and cons to signing an exclusivity agreement with a domain broker:
- Broker is pledging to work on behalf of the domain name owner to sell the domain name.
- There is a set amount of time in which a sale needs to be consummated, incenting the broker to work more quickly and efficiently.
- Less anxiety on the broker’s part that the domain owner will not pay the agreed upon commission.
- Past buyer may agree to buy a name that they had been considering for fear that a broker will find a better prospect.
- If a buyer lands on the landing page and agrees to buy the domain name without any broker intervention, commission needs to be paid to the broker.
- Agreement may list a minimum sale price and prevent the seller from lowering the price to close a deal with someone else (example: I give Sedo exclusivity with a $100k minimum. Sedo broker is working hard for the $15k commission, and if I sell for $50k, the commission is halved, without regard for broker’s time/expenses).
- Can cause a delay in a sale if domain owner has a buyer and wants to wait out the exclusivity time period.
Some exclusivity agreements can be negotiated to protect the buyer. Depending on the broker or brokerage as well as the domain name, some of these terms can be negotiated:
- Length of exclusivity period
- Lower commission if buyer isn’t found by broker but is found by other means.
- No commission paid if sale is made to a buyer that had engaged the domain owner before.
What are your thoughts on signing exclusivity agreements with domain brokers? Can you share any advice?
Reach out to Elliot: Twitter | Google + | Facebook | Email