Should Someone Start a Broker Trade Group? | DomainInvesting.com
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Should Someone Start a Broker Trade Group?

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I enjoy reading articles that share advice about buying domain names. There are usually some good tips, and it’s also helpful to learn strategies and tactics companies may use to acquire domain names from my company.

I was reading Jayson DeMers’ article about buying domain names on SearchEngineGuide.com. The article, What to Do When Your Domain Name Isn’t Available, offers some solid advice, although one paragraph about domain brokers really jumped out at me.

In the section about buying domain names from domain owners, DeMers writes,

“There are some cons, though, as well. Brokers may charge anywhere from 15 to 30 percent of the sale price and will typically tack on additional transaction fees. There’s also very little industry regulation and it’s challenging to stop unethical brokers from taking advantage of you.”

I am sure there are unethical operators in every industry, and perhaps the nature of the domain investment space makes it more easy for some people to be unethical without repercussions. I think it’s pretty bad that there is a perception about unethical domain brokers, especially because there are many domain brokers who are honest.

I think DeMers has a point about industry regulation, and I would imagine most brokers defer to the legal system where they operate. That said, I think there is a difference between what is legal and what is ethical, and perhaps a domain broker trade group could educate people who operate within the industry. The organization could set up guidelines its members must adhere to in order to remain in good standing within the group.

There are quite a few excellent and honest domain brokers with whom I have done business without a problem. I would imagine most of the well-known domain brokers and domain brokerages operate within a set of ethical and legal guidelines created by their individual companies. Perhaps it is time some of the leading domain brokers form a trade group that adheres to a set of standards, and professional brokers would have to adhere to the standards to be certified.

What are your thoughts about this?


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 (16)

    David Gruttadaurio

    Absolutely. I think it’s not just a good idea but necessary. It would also (hopefully) help regulate the commissions and fees charged to sell domain names.

    Only in the domain industry is a 15% commission considered cheap. Realtors will run their clients physically around the countryside for weeks showing homes to hopefully receive a 6% to 7% commission.

    June 10th, 2015 at 12:01 pm

    Dev

    I certainly agree with David above in regards to domain industry needing more regulation and representation. That being said, while there have always been strong parallels between selling real estate and selling virtual property, I strongly disagree with lowering the commissions less than the current industry norm. (12%-25%). The vast majority of domain sales fall within the 1k-10k range and the amount of effort to pitch and sell a 1k name is often no different than a 100k name. In many cases, selling a lower priced domain is actually more difficult requiring even more effort, as I’m sure many fellow domain brokers will agree. There are not many homes these days that sell for 1k-10k. Believe me when I tell you that most domain brokers deserve every penny of that 15% for selling a domain.

    June 10th, 2015 at 12:47 pm

    Logan

    Agree on the trade group idea. Disagree on regulating commissions/prices — those should be determined by the free market (what the buyer/seller will bear), not industry overlords.

    June 10th, 2015 at 2:01 pm

      Elliot Silver

      I don’t think commission rates should be regulated.

      This would strictly be limited to ethical business practices.

      In reply to Logan | June 10th, 2015 at 5:04 pm

    RaTHeaD

    this is interesting stuff but i think the more important question is whether someone should start a domain sex party.

    June 10th, 2015 at 3:42 pm

    Mike

    It is too small industry for anything like that. Freedom is one of reason why domainers like domaining. Any kind of regulation would harm the industry.

    June 10th, 2015 at 4:02 pm

      Elliot Silver

      It wouldn’t be for regulations – more for ethical guidelines.

      In reply to Mike | June 10th, 2015 at 5:05 pm

    Kevin

    Domain brokers are a very very small group.

    If a seller / client wants a lower brokerage fee, just ask for the fee that works for you. If you have a high quality domain at a realistic price, many brokers will accomodate your request.

    June 10th, 2015 at 4:56 pm

      Elliot Silver

      I don’t think it is limited to a commission issue.

      Here is a hypothetical example of what I would consider unethical:

      Broker X represents a company to try and buy A.com from a domain owner. The company authorizes the broker to offer up to $100,000 for the domain name but to get the best price for it. In exchange, the broker gets a % of the sale as a commission and perhaps a % of the difference between the sale price and the budget. Broker X is able to get the seller to agree to sell for $50,000 but tells the company the deal is for $90,000. Broker either collects funds or sets up escrow in a way that prevents the company and the domain owner from seeing that there is a difference between what the seller is selling for and what the buyer is paying. Broker pockets the $40,000 difference, takes a % of the sale price and also gets a % of the $10,000 that was supposedly “saved.”

      In reply to Kevin | June 10th, 2015 at 5:03 pm

    Mansour

    As a real estate broker for many years and very involved in the domain business, my biggest concern with domain brokers which is completely different from real estate brokers the fiduciary relationship with principles. In real estate as we all know the fiduciary relationship is to the seller, regardless if you are the listing broker or the selling broker. I have noticed that many of the domain brokers, even the well known ones, designate themselves as a buyer broker, this tells you right away that the brokwer wil do his best to get the domain name for the lowest price rather than in real estate, both brokers (buyer Broker and Seller Broker) do their best to get the seller the best possible price. This puts the broker who designates himself as such (Buyer Broker) as a rip off. A domain name that is worth 10000 dollars, he will do his best to get it for 2000 dollars through convincing the owner of the domain name that this is a great price so he can get more commission . I have sold many domain names. The best prices I got when I represented my own self in the negotiation. So be careful from those brokers who are buyer brokers. When they say 2,000 is the best offer, you know that the domain name is worth 10,000, and negotiate as much has you can to get a much higher price than what you have been offered.

    June 10th, 2015 at 5:29 pm

    Honest Broker

    Absolutely.

    1) Some regulation must be done to avoid the case where the seller contact the buyer after a sales and the buyer says he paid more than the price the seller agreed with the broker, and the only way this can be prevented is writing rules to incentive buyer and seller to communicate after a closed deal, with them hoping to discover the broker was unethical: hoping because the law should provide for a double compensation for both, buyer and seller, i.e. punituve damages.

    2) Immediate ban from the Broker Trade Group have to be automatic too.

    3) That also means the Broker Trade Group must have insurance to compensate defrauded sellers and/or buyers.

    4) Of course we are speaking about crimes, so jail doors have to be opened for frudolent brokers.

    5) Being banned they will not be able to work from jail, at least for the first two years (hoping the ban will last at least a couple of years, but prisoning will last at least 5).

    6) Wifi connections must be given for free after the second year in prison for brokers who want re-start.

    I could type a smile here, in particular for the last two points, but I will not do it because this is really a serious matter.

    June 11th, 2015 at 12:04 pm

      Elliot Silver

      I must applaud you for all of that effort to be snarky.

      June 11th, 2015 at 12:07 pm

    Honest Broker

    Snarky? I was going under you hypothesis. Here are your words:

    “Here is a hypothetical example of what I would consider unethical:

    Broker X represents a company to try and buy A.com from a domain owner. The company authorizes the broker to offer up to $100,000 for the domain name but to get the best price for it. In exchange, the broker gets a % of the sale as a commission and perhaps a % of the difference between the sale price and the budget. Broker X is able to get the seller to agree to sell for $50,000 but tells the company the deal is for $90,000. Broker either collects funds or sets up escrow in a way that prevents the company and the domain owner from seeing that there is a difference between what the seller is selling for and what the buyer is paying. Broker pockets the $40,000 difference, takes a % of the sale price and also gets a % of the $10,000 that was supposedly “saved.”

    Do you think what you described is a small thing, a fraud of little importance?

    Real world is generally much more snarky with this type of frauds (domain investing is not so just for many reasons, but those reasons will disappear in future. Simply I think the time for that future has already arrived).

    June 11th, 2015 at 12:47 pm

      Elliot Silver

      Snarky = sarcastic.

      The trade group wouldn’t be a lawmaking body. Its members would develop a set of ethical standards they would agree to meet. If it was found that the guidelines weren’t met, the broker would be prohibited from being a member. I would not do business with a broker who was kicked out of a trade group, so the threat of lost business would likely dissuade a broker from violating ethical standards.

      If I thought what I described was a small thing, I wouldn’t have written about it. I think there are many unethical things people (brokers and non-brokers) do in the business. Some are big issues and some are smaller. I think it’s unethical for someone to go through a list of names with BIN prices and contact prospective buyers to sell domain names they don’t own hoping to get a buyer to commit at a higher price. I think it’s unethical for people to try and sell domain names at auction when they haven’t won the auction yet (frontrunning).

      If there was a trade group that the top brokers were members of, they would likely be afraid of committing ethical violations that could result in their expulsion from the group. It’s certainly more complicated that just starting a trade organization and running with it.

      June 11th, 2015 at 12:58 pm

    Honest Broker

    Sorry, I confused snarky with snaky. Yes I agree with you, what matters is to create at least some sort of rules, even if those are autoregulations, also because your hypothesis (to which I am sure we all thought many times after having seen at least once how secretly a broker can run a transfer within Escrow.com or other escrow websites) in my opinion is one of the most serious, the one that even more than other prevents the creation of a respectable market, a little less far west, and much worse it prevents good and stable relations between sellers and brokers.

    June 11th, 2015 at 2:43 pm

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