In this article
Domain escrow works by placing a neutral third party between the buyer and the seller: the buyer pays the escrow agent, the agent confirms the money is secured, the seller transfers the name, the buyer confirms control of it, and only then does the agent release the money to the seller. Neither side has to go first, because the money is committed before the name moves and the name has moved before the money is released.
A domain sale has an awkward shape: the payment and the asset travel on two unrelated systems, a bank on one side and a registrar on the other, and neither system knows about the other. The escrow agent is the one participant who watches both and acts on instructions that both parties signed at the start.
The first two figures are from ICANN's Transfer Policy for generic extensions; the third is from the California Department of Financial Protection and Innovation.
What are the steps of a domain escrow, in order?
A domain escrow has six steps: the parties agree the terms, the buyer funds the transaction, the agent verifies the funds, the seller transfers the name, the buyer inspects it, and the agent releases the money. Each step has one party responsible for it, and the agent does not open the next step until the previous one is confirmed.
The figures in the steps below belong to one worked example used through the whole article: a two-word .com name sold for $48,000, with an escrow fee of 1% shared equally between buyer and seller. The price, the fee rate and the durations are illustrative assumptions, chosen to make the arithmetic visible; they are not a quotation from any agent.
- Agree the termsOne party opens the transaction and the other accepts it. The record states the name, the price of $48,000, who pays the fee, the length of the inspection period, and how the name will be delivered. Both parties are identified by the agent before any money moves.
- The buyer fundsThe buyer sends the price plus the buyer's half of the $480 fee, a single payment of $48,240, to the agent's client account, using the payment details shown inside the transaction and nowhere else.
- The agent verifiesThe agent waits until the payment is received and no longer reversible by the method used, then tells both parties that the funds are secured. Nothing is asked of the seller before that message.
- The seller transfersThe seller moves the name to the buyer: either an account change inside the same registrar, or a transfer to the buyer's registrar using the authorisation code. The seller then marks the transfer as done.
- The buyer inspectsThe buyer checks that the name sits in an account the buyer controls, that the registrant record shows the buyer, and that the name is the one described. The buyer accepts, or the inspection period runs out, whichever comes first.
- The agent releasesThe agent pays the seller the price less the seller's half of the fee, $47,760, and closes the transaction with a record both parties can keep.
The buyer's $48,240 and the seller's $47,760 differ by exactly the $480 fee, which is the only money that stays with the agent. What a fee looks like at different price levels, and who usually bears it, is a separate subject; for this article it is enough to know that the fee and its split are terms of step one, fixed before anyone pays.
What do the buyer and the seller agree before any money moves?
Before any money moves, the buyer and the seller agree five things inside the escrow transaction: the exact name or names, the price and currency, who pays the escrow fee, the length of the inspection period, and the method of delivery. These terms are the agent's instructions, and the agent follows them rather than either party's later wishes.
An escrow agent is not a judge and not the adviser of either side. It holds money on written instructions agreed by both, and it acts when the conditions in those instructions are met. If the buyer says the name was not delivered and the seller says it was, the agent looks at what it can observe, typically the public registration record and the registrar's status, and at what the instructions say.
So the quality of step one decides how well the rest goes. Three details are often left vague and should not be.
- What "delivered" means. For a single name, it normally means the name is in the buyer's registrar account with the buyer as registrant. If the buyer intends to move it to another registrar afterwards, say whether delivery is the account change or the completed move.
- What else is included. A website, email accounts, social handles, a trademark or a logo are not part of a domain name. If they are part of the price, list them, and accept that the agent can only verify the items it has a way to observe.
- How long the buyer has to inspect. A short period keeps the seller's money moving. A period that is too short for a buyer in another time zone to log in and check invites a dispute that nobody wanted.
How does the name actually move from the seller to the buyer?
The name moves in one of two ways: an account change inside the same registrar, often called a push, or a transfer from the seller's registrar to the buyer's using an authorisation code. The push is usually complete within hours; the transfer between registrars is the slow part of most domain escrows.
For generic extensions such as .com, the rules are in ICANN's Transfer Policy. Under that policy the registry completes a transfer between registrars unless the current registrar refuses it within five calendar days, which is why a transfer that nobody speeds up takes about that long.
The same policy contains two locks that matter in a sale. A registrar may refuse a transfer requested within 60 days of the name's creation or within 60 days of a previous transfer between registrars. And a registrar must impose a 60-day lock on transfers to another registrar after a change of registrant, defined as a material change to the registrant's name, organisation or email address, unless the holder opted out of that lock before the change was requested and the registrar offers the opt-out.
In practice this produces a common situation. The seller pushes the name to the buyer's account at the seller's own registrar. The registrant has changed, so the name may now be locked at that registrar for 60 days. The buyer controls the name but cannot move it to the registrar the buyer normally uses until the lock ends. It is a reason to ask, at step one, which registrar holds the name, whether it was registered or transferred recently, and whether the opt-out is available.
Two cautions apply. ICANN revises the Transfer Policy from time to time, so the current text is the reference, not a summary read some time ago. And country-code extensions follow the rules of their own registries, which can differ on codes, locks and timing, and occasionally require the registry's own change-of-holder procedure.
Which variants of domain escrow exist?
Domain escrow comes in three main variants: the standard transaction, where the name passes directly from seller to buyer; a concierge or holding service, where the agent takes the name into its own registrar account; and an instalment or lease-to-own holding, where the agent keeps the name while the buyer pays over time. The difference between them is who holds the name while the money is in motion.
| Variant | Who holds the name during the deal | When the seller is paid | Suits |
|---|---|---|---|
| Standard | The seller, until funds are secured; then the buyer | Once, after the buyer accepts or the inspection period ends | Two parties comfortable handling a registrar account |
| Concierge or holding | The agent, in its own registrar account | Once, after the agent has delivered the name to the buyer | High-value names, first-time buyers, parties who want the agent to confirm delivery itself |
| Instalment or lease-to-own holding | The agent, for the whole payment term | Each instalment as it arrives, less fees | A buyer paying over months or years; a seller who wants income without giving up the name early |
In the concierge or holding variant the seller transfers the name to an account controlled by the agent before, or as soon as, the buyer has funded. The agent then holds both sides of the bargain at once: the money and the name. It can confirm delivery from its own records. The seller is protected because the name does not reach the buyer until the funds are secured; the buyer is protected because the name is already out of the seller's hands. The cost is an extra movement of the name, with the locks described above to plan around, and usually a higher fee.
In the instalment or lease-to-own variant the agent holds the name for the length of the payment plan. The buyer is normally given control of the name servers, so the buyer can run a website and email on the name from the first payment, while the registration itself stays with the agent. When the final payment clears, the agent transfers the name to the buyer. If the buyer stops paying, the agreed terms say what happens, and in most plans the name returns to the seller and the payments already made are kept.
Take the same $48,000 price paid in 12 equal monthly instalments of $4,000. After seven payments the buyer has paid $28,000 and owes $20,000 over the remaining five months. At that point the agent holds the name, the buyer is using it, and the seller has received seven payments less fees. The terms to settle at the start are the grace period for a late payment, whether the buyer may pay the balance early, who pays the annual renewal, and what the buyer may and may not do with the name during the term.
Who is the escrow agent, and how is it licensed?
The escrow agent is a business, or a professional such as a lawyer, that holds other people's money on agreed instructions, and whether it needs a licence depends on the law of the place where it operates and of the places where its customers are. There is no single worldwide licence for domain escrow, so the question to ask is always which regulator, in which jurisdiction, under which law.
California gives a clear example, because its law addresses the activity by name. The California Financial Code defines an Internet escrow agent as any person engaged in the business of receiving escrows for deposit or delivery over the Internet. The California Department of Financial Protection and Innovation, which administers the state's Escrow Law, says that persons or companies performing escrow services over the Internet in California are subject to its licensing requirements, that the licensee must be a corporation, and that providers located outside the state that serve California are required to be licensed as well.
The same regulator sets out what a licence requires in that state. According to the Department's published guidance, an escrow agent must file a surety bond of at least $25,000, rising to as much as $50,000 with the volume of escrow liability; must keep tangible assets exceeding total liabilities by $50,000 and liquid assets exceeding current liabilities by $25,000; and must station at each licensed location a manager with at least five years of responsible escrow experience. Escrow money must be kept in a trust or escrow account, separate and apart from the agent's own funds, and labelled so that it is plainly not the agent's money. The Financial Code also requires a licensee to submit audited financial statements to the regulator within 105 days of the end of its financial year, with the report of an independent accountant. For kinds of escrow outside the list that the statute assigns to the state's escrow fidelity corporation, the guidance requires a fidelity bond of not less than $125,000 covering each officer, director and employee.
Read those figures for what they are. A bond of $25,000 is 52% of the $48,000 in the worked example and a small fraction of a seven-figure sale, so the bond is not what stands behind your money. What stands behind it is the separation of client funds from the agent's own, the regulator's power to examine the trust account, and the yearly audit. That is the substance of a licence.
California's law also exempts some people from the escrow licence, among them banks and trust companies acting under their own laws and lawyers licensed in the state who act for a client in a genuine client relationship and are not in the business of escrow. That points to the second kind of agent you will meet. In many countries a law firm holds the purchase price in its client account under the rules of its own professional regulator. Elsewhere the activity may fall under rules for payment services, money transmission or trust businesses.
What does domain escrow protect you against?
Domain escrow protects the buyer against paying for a name that never arrives and the seller against transferring a name for money that never arrives or is later reversed. It deals with one specific exposure, the gap between payment and delivery, and it closes that gap for both sides at once.
The table sets out what falls inside that protection and what falls outside it. The right-hand column is not a list of shortcomings: these are matters no holder of funds is in a position to verify, and each has its own remedy.
| Risk | Covered by the escrow? | Why |
|---|---|---|
| The buyer pays and the seller never transfers | Yes | The money stays with the agent and returns to the buyer under the agreed terms |
| The seller transfers and the buyer never pays | Yes | The seller is told to transfer only after the funds are secured |
| A payment reversed after the name has moved | Largely | The agent waits for the payment to be final for its method before instructing the seller |
| The seller did not have the right to sell the name | No | The agent checks control of the name, not the history of its ownership |
| A trademark owner later claims the name | No | A dispute procedure or a court decides that, long after release |
| The name is worth less than the buyer believed | No | Value, traffic and revenue are for the buyer's own due diligence |
| Tax, invoicing and reporting on the sale | No | Each party's own obligation in its own country |
A name that was taken from its rightful holder can pass through a perfectly run escrow, because at the moment of transfer the seller really does control it; the remedy is to look at the ownership history before agreeing a price, and to obtain a written warranty of ownership from the seller. And a name that reproduces someone else's trademark can be challenged after the sale under the dispute policy that applies to its extension, whoever paid for it and however carefully.
Inside its field the protection is symmetrical: both sides are covered at once. A marketplace that handles payment and transfer inside its own platform, or a lawyer's client account, can do a comparable job, and between parties with a long history a direct payment can be reasonable.
What should you check about the escrow agent itself?
Before sending money, check five things about the escrow agent: that it is licensed or professionally regulated where it claims to be, that you are dealing with the real firm and not an imitation of it, that client money is held in a separate trust account, that its terms cover the situations you care about, and that you reached it yourself. An escrow arrangement moves your exposure from the other party to the agent, so the agent is the party to verify.
| What to check | How to check it | What a good answer looks like |
|---|---|---|
| Licence or regulation | Search the regulator's own public register for the legal entity's name | The entity appears, the licence is active, and the type of licence covers escrow |
| Identity of the firm | Type the agent's address yourself; never follow one supplied by the other party | The address matches the one on the regulator's register and on past paperwork |
| Client funds | Read the terms and ask where the trust account is held | A named bank, an account labelled as trust or escrow, separate from operating funds |
| Terms on disputes and failure | Read the sections on disagreement, cancellation and unclaimed funds | A stated procedure and a stated time limit, not silence |
The second row matters most in day-to-day practice. The party proposing escrow should never be the only source of the agent's contact details. The exposure to guard against is an imitation of a real agent, proposed by a counterparty who insists on it, whose payment details lead to an account that the real agent does not hold. Choose the agent together, reach it by typing its address yourself, and confirm the legal entity against the regulator's register before you fund.
Check your own side of the process too. The agent will ask each party for identification, and for a company, for documents showing who owns and controls it. It is a common reason a first transaction starts slower than expected. Have the documents ready, and make sure the name on the paying bank account matches the party named in the transaction, because a payment arriving from an unrelated account is likely to be held or returned.
How long does a domain escrow take, in a worked case?
In the worked case a domain escrow takes nine days from agreed terms to money in the seller's account when the name moves between two registrars, and four days when it moves inside one registrar. The transfer itself, not the agent, accounts for most of the difference.
The assumptions are these, all illustrative: terms are agreed on day 0; identification and the buyer's bank transfer take two days, so funds are secured on day 2; the seller starts the transfer the same day; the buyer has three days to inspect and uses one; the agent's payout reaches the seller's bank one day after release. The registrar transfer is given its full five calendar days under ICANN's Transfer Policy, the case where nobody approves it early.
Worked example, not a measurement. The transfer is shown at the five-calendar-day maximum of ICANN's Transfer Policy; the other durations are assumptions.
Funds are secured on day 2 and the transfer completes on day 7. The buyer could wait until day 10, when the three-day inspection period would lapse, but accepts on day 8. The agent releases the same day and the seller sees $47,760 on day 9.
Now change one fact: the buyer opens an account at the seller's registrar and the seller pushes the name there. The transfer stage shrinks to nothing, since the push is done on day 2, the buyer accepts on day 3 and the seller is paid on day 4. The price of those five days is the lock described earlier: if the registrar applies it, the buyer may wait 60 days before moving the name to another registrar.
The stages you can shorten are the first and the third. Complete identification before agreeing the price, send the payment by the method the agent can treat as final soonest, and inspect on the day the name arrives.
What happens when a step does not go to plan?
When a step does not go to plan, the escrow stops at that step and the money stays with the agent until the instructions say where it goes. That pause is the protection working, and each of the usual failures has a defined outcome.
The buyer never funds. Nothing has moved. The transaction lapses or is cancelled, the seller still has the name, and the only cost is time.
The funds arrive from the wrong account or in the wrong amount. The agent holds the payment while it asks questions, and may return it to the sender. Bank charges deducted along the way can cause a small shortfall, so the buyer should send the full amount with charges paid by the sender.
The seller does not transfer. After the period set in the terms, the buyer can ask for the transaction to be cancelled and the money returned. Whether the escrow fee is returned in full depends on the agent's terms.
The buyer rejects the name during inspection. The terms normally require the buyer to return the name before the money is returned, the mirror image of the original sequence. If the buyer neither accepts nor rejects, the inspection period ends and the agent releases to the seller, which is why the seller wants that period to have a fixed length.
The parties disagree on the facts. The agent holds the funds and follows its dispute procedure. It does not decide who is right about a warranty or a valuation. The conditions for release should therefore be things an outsider can observe, such as the registrant record, and not matters of opinion.
A broker, where there is one, works alongside the agent: the broker negotiates and coordinates, the agent holds and releases, and the broker's commission is commonly listed in the transaction as a separate disbursement paid at release.
