Domain Escrow: How It Works and When You Need It

Domain transactions have a simple problem: the buyer wants the domain before paying, and the seller wants payment before transferring. Neither party wants to go first.

Escrow solves this. A neutral third party holds the payment until the transfer completes, then releases it to the seller. Both sides are protected.

How Domain Escrow Works

The process for a basic escrow transaction:

1. Buyer and seller agree on price and terms
2. Buyer sends payment to the escrow service, not to the seller
3. Escrow service verifies payment received
4. Seller initiates the domain transfer
5. Buyer confirms the domain transferred to their registrar account
6. Escrow service releases payment to the seller

If the seller does not transfer the domain within the agreed window, the escrow service refunds the buyer. If the buyer refuses to confirm receipt without cause, the escrow service investigates and resolves the dispute.

The whole process typically takes 5-10 days, including the domain transfer period.

The Major Escrow Services

Escrow.com is the most widely used and ICANN-recommended domain escrow service. It is licensed in multiple US states and several international jurisdictions. Fees for domain transactions start at 3.25% of the transaction value, with a minimum fee of $49.50. Both buyers and sellers can use it. Most domain marketplaces (Sedo, GoDaddy Auctions) route transactions through Escrow.com by default.

Dan.com has its own built-in payment processing that functions similarly to escrow for marketplace transactions. If you buy through Dan.com's platform, the funds are held until transfer is confirmed. For off-platform transactions, Dan.com supports escrow as a separate service.

Sedo Escrow operates within Sedo's marketplace. If you are transacting on Sedo, their internal payment handling covers the escrow function.

When Escrow Is Required

Any private transaction above roughly $500 warrants escrow. Below that threshold, the escrow fee may represent a high percentage of the deal value, and some buyers and sellers choose to proceed on trust for low-value names. The risk scales with the price.

For any transaction above $1,000, use escrow. The 3-4% fee is cheap insurance against either counterparty failing to perform.

For transactions conducted entirely within a major marketplace (Afternic, Sedo, Dan.com), the platform handles the payment security. You do not need separate escrow. The risk of platform fraud is low and covered by the platform's dispute resolution.

Situations Where Escrow Prevents Problems

Seller disappears after payment. Without escrow, the buyer has paid for a domain they may never receive. With escrow, the funds are never released.

Buyer claims non-receipt after domain is transferred. The escrow service requires the buyer to confirm receipt. If they falsely deny it, the service reviews transfer records and resolves accordingly.

Transfer fails due to a lock or dispute. If the domain cannot be transferred, escrow holds the funds until the issue is resolved or the transaction is cancelled.

International transactions. Wire transfers across jurisdictions without escrow have limited recourse if something goes wrong. Escrow.com operates across multiple jurisdictions and handles currency conversion.

Red Flags That Require Escrow

Be especially cautious if:

• The seller is unwilling to use escrow for a transaction above $500
• The seller proposes an unfamiliar escrow service you have not heard of (fake escrow fraud is a real category of domain scam)
• The seller wants to use a peer-to-peer payment method (PayPal Friends and Family, Venmo, crypto) instead of escrow
• The domain is valued significantly above what comparable sales data supports

Verify any escrow service independently before sending funds. Use Escrow.com or a major marketplace's built-in payment flow. Do not use a service the seller recommends without independently confirming it is legitimate.