Why Commission-Based Domain Brokers Might Not Be Your Best Bet

Almost all domain name brokers on the buying side today charge a commission on the sale price. The markup that the broker adds can vary, but fees can range from 10-15% or more. The argument is often that you don’t have to pay if there is no deal. However, in cases where there is a deal, commission-based broker services can also be a hefty cut.

Like inexperienced domain traders who are inspired by abnormally high sales prices and perhaps set prices that scare off the few potential customers that exist, brokers can also try to take advantage of unsuspecting customers. Commission-based compensation can make unscrupulous brokers work “just enough” to try to reach a reasonable price.

Brokers in the real estate market can also charge based on the sale price, and that is an accepted standard. However, the markups are significantly lower, and it should not be forgotten that prices in the real estate market are much more predictable and can also be anchored in relevant comparisons from other similar sales.

When the same logic is applied to domain names, an unregulated and unknown market, the results can be less attractive, and sometimes terrifying. Some examples have clearly shown how sellers and brokers in collusion have inflated a price that the domain name would never otherwise have reached.

For a buyer, there is no way to know if the sale price was honestly negotiated and if it received the best possible price, as long as the contractor works on commission. The broker usually has sole access to all information in the case, and there is weak transparency around the negotiation process with the buyer. With an asset class like domain names, where one domain name can be sold for 5 million and another for 500 SEK, the risk of unnecessarily bad deals is significantly higher. It simply cannot be known for sure whether you are being cheated or not.

But there are always ways to minimize the risk of being deceived. One way is to hire a broker who does not make a living on single commission amounts at high sale prices, but charges for the work put in during the acquisition process.

Dotkeeper has chosen not to work on commission for domain acquisitions and only charges by the hour for the work put in. We also place great emphasis on open dialogue during the process.

For those who want control over expenses and insight into how the process is going, a broker who charges ongoing for the time they work is the best option.