Seller in California...what do I do?

[bobactuallyismyuncle]

I've been reading the great resources here about closing a website purchase deal. I was hoping to understand a bit better the game plan I should have with the seller of the website I'm going to purchase -- since he is located in California and I am in New York.

Since it seems that the use of an escrow company in CA is wrought with risk, what alternative should I consider? Should I hire a local CA attorney to act as my agent? Or something else? I'd like to keep the expense low on this point, but would also like to limit my risk in completing the sale.

I will draw up the contract myself. The sale will include the domain name along with membership lists, forum content, blog content, etc.

Thanks!
-Chuck

[Clinton]

It depends on the amount involved, Chuck. My personal comfort limit would be, maybe, $5K and if it was below that I'd go ahead with escrow.com or save money and use a domain escrow - same level of protection. Your comfort limit may vary.

If it's a $100K+ transaction I'd hire a good lawyer in my local state and wouldn't play around with doing the contracts myself. I'd let the legal eagle handle the escrow. A NY lawyer recently signed up here, katinkers, and she'll probably endorse the idea of using a lawyer Shop around a bit and talk to a few first.

If it's between $5K and $100K, I'd fly down from NY to CA to look the seller in the eye and shake his hand.

[bobactuallyismyuncle]

thanks Clinton..we started at $7500 and based on due diligence we agree that $6250 is the right number. This would not put me out on the street if lost but certainly would end my first attempt at buying a website business for a loooooong time.

I have a good friend who is a NY attorney. Do you think it would be reasonable for me to ask the seller to use him as the escrow agent? I am comfortable writing the contract myself since I have had a lot of experience writing contracts and I know exactly what I want in it. My friend will review it for me.

I am just trying to figure out the cleanest way to get the seller his money and get me the passwords and ownership of the property.

-Chuck

[petertdavis]

On a $6K sale, I'd be very suspicious if my buyer started asking to use their "lawyer friend" to do the escrow.

[bobactuallyismyuncle]

Peter, actually he is my attorney so nothing below board on that -- he would not risk his professional credentials by helping me scam someone out of $6,250. He is bound legally and ethically to manage funds placed in trust with him according to the terms specified in a contract. But, likewise, if my seller wants to use an attorney in CA I have no problem with that either, although costlier to me since my friend/attorney is on retainer.

I guess my basic question was should I use a lawyer or use an escrow company (?)

And, how would this work in either case? Is this the workflow:

1. Money is placed in trust with a 3rd party (attorney or escrow company).
2. Contracts are executed.
3. Seller sends password/login information to 3rd party.
4. Buyer has opportunity to validate that password/login information is correct -- or does the 3rd party handle this (?)
5. Upon a signal from buyer that transfer of property is legitimate, funds are authorized for release to seller.

Is this the idea?

-Chris

[Clinton]

With escrow.com, the flow is
1. Buyer remits funds to escrow.com
2. Seller demonstrates the domain has transfered - no contract execution here, changing WHOIS to display buyer's email address as registrant contact is sufficient for escrow.com purposes
3. escrow.com will release the funds with or without buyer consent

With a lawyer, the flow is as described in your contract, no more, no less.

[bobactuallyismyuncle]

wow...sounds like using escrow that way is next to zero protection for the buyer. A seller could change WHOIS and never give up the passwords on the registry account or the hosting account. Yikes.

[Clinton]

Well, if he's used the buyer's email address as the registrant contact, the buyer can take registrar control of the domain ...so that bit's safe if the buyer remembers to log in and change the password or moves the domain.

If the buyer is not clued up and doesn't act fast enough, a seller could log back in after receiving the funds and change the contact email address back to his own. Voila, he's got the money and he's got the domain

[hooperman]

Could the buyer obfuscate the domain transfer by putting domain privacy on or transferring it to their friend until passwords had been given? Not ideal, but the transaction won't complete until escrow.com has verified that the domain transfer took place.

[bobactuallyismyuncle]

I'm starting to like the lawyer idea better, I think. If there is any analog here to the way it works when you build a house, when I did that several years ago I had the money to build the house held in my lawyer's account, and as the builder hit completion milestones according to the contract I authorized release of funds to the builder. If I failed to release the funds then the builder could call me in breach of contract and by law my lawyer would freeze my funds until the matter was adjudicated. Likewise, if the builder did not hit a milestone I did not release funds. (thankfully in this case everything did go very smoothly).

Can't I think of this transaction the same way? I put funds in trust with an attorney, and then once the seller performs his part under the contract I authorize release of funds? If I don't then I'm in breach and can be sued. The funds remain held in trust with the lawyer -- if he were to return them to me then he'd be putting his license at risk of disbarment.