Types of Domain Name Acquisition Deals | Domain Investing

Types of Domain Name Acquisition Deals

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Earlier this week, I wrote an article about using an option to buy a domain name. Since there are many types of deals that can be struck to acquire a domain name, I thought I would discuss some of them in a blog post.

It may be beneficial for a buyer and seller to work out a creative deal when a straight-forward acquisition is not possible. Some buyers don’t have the capital to buy a domain name as they start their business, and others would benefit from securing the domain name as their business launches. A creative deal can add value to the seller and give the buyer flexibility.

If you can think of other deal structures that aren’t mentioned below, please add them to the comment section so that I can add them to the article.

Types of domain acquisition deals:

Standard Acquisition – This is the most standard type of domain name sale. The buyer agrees to acquire a domain name for a set amount of money, and the deal is completed with one payment.

Financing – There are two ways a buyer can finance a domain name purchase, either with seller financing or third party financing. In the case of seller financing, the buyer pays for the domain name in installments over a set period of time, at a set rate of interest. In most cases, an escrow service like Escrow.com will hold the domain name in escrow while the buyer completes the payment. In the case of third party financing, a company like Domain Capital will be engaged, and the domain name will be paid for by Domain Capital, who will hold/own the domain name while the buyer pays off the loan.

Lease to Own – The buyer will lease the domain name at a set rate over a period of time, and once the full amount of the domain name is paid, the buyer will take possession of the domain name. If the buyer stops the lease payments, the domain name is returned to the owner, who keeps the payments made up until that point. A company like Escrow.com can be engaged to facilitate these deals.

Option to Buy – A buyer pays a domain owner a set option price to lock in the ability to purchase the domain name at a later date for the option price. If the buyer does not follow through, the seller keeps the option fee.

Sale with a Resale Bonus – A domain name is sold under the guideline that if it is subsequently sold by the buyer, the original domain owner will receive a percentage of the future sale.

Equity Exchange – The buyer of the domain name will subsidize the purchase price with equity in the company that will be using the domain name. Instead of paying for the domain name in cash, the seller will obtain equity in the buyer’s company or the company that will be started for the purpose of using the domain name.

Trade of Services – Instead of paying cash for a domain name, a company will provide services of the same value for the domain name. For example, if a house cleaning service buys a domain name, they will provide cleaning services to the seller of the domain name.


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 (6)

    Tauseef

    Domain Barter: I think this is also prevalent that is exchange of domains for domains. Could be an exchange of a single domain for multiple or one for one.

    October 17th, 2014 at 11:08 am

      John

      If only anyone was ever willing. Every single time I’ve tried that over the years no one was even willing to consider it, not even with cash on top and the other party getting a nice deal in their favor.

      In reply to Tauseef | October 17th, 2014 at 5:27 pm

    ALX

    I once spent weeks negotiating a complicated rev share deal for a domain that I really wanted, and that I thought the owner wanted to have some skin in the game on. Eventually after trying to explain all the ins and outs and possibilities of what could happen the guy said to me “why don’t you just buy it outright?” – and I did. Lesson learned….

    October 17th, 2014 at 3:56 pm

    John

    I like the idea of cash or cash payments of some kind plus equity to the seller – and I will also acknowledge here that to the best of my recollection, I did not think of that particular one first on my own and the only person I can think of regarding whom I may have first heard about an option like that was Rick Scwartz.

    October 17th, 2014 at 5:30 pm

    John

    As far as barter goes: I have often thought that if it makes any difference, people can do things like do a formal deal via Escrow.com for $1 for the domains involved. That can help engender confidence and give rise to various legal/contractual rights and protections if pure barter may not.

    October 17th, 2014 at 5:34 pm

    John

    I’ve long wanted to see a comprehensive thread about the option of leasing. Especially, all the risks and potential pitfalls involved. With that in mind, I have also wanted to see particular attention to the issue of the contract itself, and what should be in it. I have also long thought there could be an off the rack standard contract for such purposes that people can buy rather than everyone being on their own to have to pay whatever legal fees they might otherwise have to pay for custom made documents. Obviously there should also be a little room for customization, however, but easy for the buyer to do on their own if they don’t want to always visit a lawyer to make it, even if they might want a lawyer to examine and give some advice on it. There are standard documents one can buy like that for various purposes, such as apartment leases, will kits, etc., so I believe this should also be available in the same way.

    October 17th, 2014 at 5:39 pm

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