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Thread: How to avoid escrow scams?

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    Administrator Clinton is a Premium Member
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    How to avoid escrow scams?

    We know that escrow.com is not the safest option for the transaction of buying/selling a website. First of all, they don't actually handle the buying and selling of sites (though most people don't realise that). As they are just domain escrows it's dangerous to put a site transaction through them expecting that they'll cover the whole transaction. They don't. There are other caveats.

    So some of us look elsewhere.

    But there are a lot of escrow scams around. I've found a couple of good articles on the topic.

    Bankrate.com offers 10 Tips For Spotting Escrow Scams and this one is about escrow scams within eBay. According to this MSNBC article, over 300 escrow scams are caught and shut down every year!

    What tips do you have for avoiding escrow scams and/or what escrow do you use for domain transactions and what do you use for website transactions?
    Find the right business brokers to maximise the value you extract from your business and improve the chances of selling your business.

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    I don't have any tips but I have a question that's been bugging me. Suppose I'm selling a domain to someone and we start an escrow transaction. I push the domain to the buyer, but they immediately transfer it to a friend. The domain doesn't have the buyer's name in the WHOIS so escrow won't release the funds, yet they have control of the domain. Is this possible?

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    Escrow can't confirm that the buyer has taken possession unless the contact email address for the buyer is the email address escrow has for the buyer. Or if the buyer notifies escrow that he has received the "goods".

    In your immediate retransfer scenario you are stuck. Unless you can prove to the escrow that you transferred control, they won't release your funds.

    If it's just a domain you're selling use SEDO! As the escrow company doubles as the registrar they know when the buyer has control.

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    I have used escrow.com. In my case I had a buyer who asked for a two day inspection period. I knew he could take the content and run but there really wasn't anything he couldn't have gotten hold of in other creative ways if he really wanted to anyway. I chatted with the buyer via Skype and asked plenty of questions, viewed some of his other online businesses and generally cross referenced as much info as I could before transferring the domain.

    If there was a program involved and or any specific copyright/trademark transfers then unfortunately I wouldn't know where or how to protect myself in that situation.

    I hadn't thought too much about scams or really understood the risks so thanks for the links

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    "escrow.com" certainly don't protect anything other than the domain name in the escrow transaction, so your copyright/trademark etc., could quite easily be stolen if you use them.
    Find the right business brokers to maximise the value you extract from your business and improve the chances of selling your business.

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    I'm potentially about to sell my cash cow for a pretty large sum and reading about all these issues gives me the jeebies. Escrow.com seems like the best bet, but still far from perfect. Is there a perfect ecrow service out there? It seems not.

    Doing due diligence on a buyer seems to be as important as in the reverse role, yet I suspect most folk barely consider it. I think it'd be helpful to think about a checklist of items that should be considered in the due dilligence process. Here are my thoughts, but feel free to share yours and we can look to produce a comprehensive document that we could all use.
    • Is the buyer asking you to provide comprehensive proof of income and traffic data?
    • Have they asked you about your other business activities?
    • Have they enquired about the technical aspects of the site (language, db etc)?
    • Do they seem to care about the running costs of the site (advertising, hosting etc)?
    • Have they provided information on their business activities and character?
    • Did they ask you a bunch of questions to understand your own character profile?
    • Do they seem to be competent about the web and the technical aspects of running a site?
    • Do they have a genuine interest/understanding of the sites topic?
    • Did they create a contract or asking you to do it?
    • Which escrow service are they trying to utilise?
    • Are they pushing for an inspection period?
    • Did they ask for a period of post-sales support?

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    Administrator Clinton is a Premium Member
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    kmander, may I ask why escrow.com seems the best bet? Just curious, and fascinated at the power of the escrow.com brand. If it's providing just domain escrow - like SEDO etc., - but charging a much larger fee, why do you feel it is the best bet?

    Have you heard of software escrows?

    DD on the buyer: Absolutely. The larger the transaction the more important it is to know who you're dealing with. When larger businesses ($500K+) are sold it's not unusual for the seller to inspect the buyer's books and do a credit check on the buyer. OK, in most of those cases, there's an element of seller financing, but even in cases where there isn't experienced buyers expect such probes and happily submit to them.
    Find the right business brokers to maximise the value you extract from your business and improve the chances of selling your business.

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    You're right - it's the brand that's shining through for the most part. It's become so popular in our business that it seems to have pretty much become the de-facto solution. I trust SEDO just as much as Escrow.com, so I should really opt for that if it's cheaper. I'm not aware of many other alternatives, so therefore instantly am dubious about them since they're just not used as much.

    Not heard of software escrows - will have to research more!

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    Here are some authentic escrow companies.

    The site also provides some useful information on escrow scams and protecting against them.

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    Interesting this thread has come up.

    I saw a thread on another forum saying this:
    Since 1 November 2009, with the introduction in the UK of the Payment Services Regulations, escrow services finally come under the auspices of the FSA and HMRC. You will find genuine escrow companies at the FSA online register at www.fsa.gov.uk/register/psdFirmSearchForm.do (http://www.fsa.gov.uk/register/psdFirmSearchForm.do) (try searching there for 'escrow' as an example) and/or at https://customs.hmrc.gov.uk/msbregister/checkTerms.do (try searching there for 'tru' in the name box and 'NW11' in the postcode box for one such genuine example).
    With all those references to the Financial Services Authority and Her Majesty's Revenue and Customs, the mention of a real "Payment Services Regulation" and links to genuine FSA and HMRC sites, I thought the guy was on to something and searching at those links would reveal some genuine escrow companies. Not so. He's got a company approved for something at those sites and tries to pass that off as FSA and HMRC approval for this company's escrow services! HMRC approving escrow services?!

    Do a few searches and you'll see he's been posting that in many forums. Some deleted his links as spammy. Most haven't caught on yet.

    He helpfully suggests that if you're searching at the HMRC site, you could try the term "tru" with a random postcode "NW11". Funny how that then comes up with a domain name that matches his screen name. If you're trying the FSA site, his suggested search term is "escrow". Again, it'll lead you to his own site.

    He forgets to mention that the FSA says this company is only approved for "payment services" and "Payment services are not covered by the Financial Services Compensation Scheme." But he does go to great lengths to explain that he's the first to be approved under the new regulations and even Paypal et al aren't registered yet.

    But it's a flat rate of only 2.99 per transaction
    Find the right business brokers to maximise the value you extract from your business and improve the chances of selling your business.

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