Marketplace brokers need to clearly state their interests.
A couple months ago the founder of a startup reached out to me for advice about getting the domain name that matched their company name. The founder wasn’t having any luck contacting the owner of the domain name but it was listed on a marketplace. He tried to negotiate through the marketplace but ultimately the domain owner was unresponsive.
I suggested he engage the marketplace’s brokers directly given that he was looking at a five figure purchase. This approach was successful and he bought the domain name.
As I discussed the outcome with him it became clear that he wasn’t happy with the outcome. It wasn’t paying five figures that bothered him, it was the process. The conversation went something like this:
Founder: The broker kept coming back to me and asking if I could raise my offer. But his commission is tied to the offer.
Me: It’s a lot like real estate. The broker ultimately makes more money if you pay more.
Founder: But in real estate you have a buyer broker and a seller broker. The broker isn’t playing both sides. It’s clear who they’re representing.
He’s right. In this case he has a legitimate question. Was the broker really working for him, or was he working for the seller?
I’m not sure who he should have been working for. The seller had listed the domain on the broker’s marketplace, after all. But the buyer had an expectation that the broker would work to get the domain at the lowest possible price by representing his interests.
I’m going through the process of buying a house right now. In residential real estate (at least in Texas) the broker has to be clear about who they’re representing. If they’re representing both parties they have to remain neutral and this has to be clearly explained to both the buyer and seller.
I’m don’t know whether a broker that works for a marketplace should represent the buyer, seller, or be neutral. But they should be clear and explicit about it up front.
Kevin Murphy says
The book and movie “Freakonomics” does a pretty good job of analysing how realtor behavior is aligned with their commissions. Sounds like it probably applies here too.
Rob Sequin says
GREAT post.
As an active domain buyer broker, here are my thoughts and how I handle this type of situation.
First, if you want to buy a domain and approach a domain marketplace, the broker is OBVIOUSLY working 100% in the seller’s best interest.
The broker is employed by the marketplace and the seller has the domain listed with the marketplace. So, the broker will (should) work 100% in the best interest of the seller therefore trying to get the highest price.
Buyers should hire an independent domain buyer broker who will clearly represent the buyer’s best interest aka getting the lowest price possible for the buyer.
But then the domain buyer broker gets less commission?
Not the way I structure my agreements.
My commission is half the difference between the actual purchase price and the buyer’s maximum budget.
If the buyer has a max budget of $20k and the actual purchase price is $10k, my commission is $5k… buyer pays $15k and everyone is happy.
If you ever engage with a broker, he/she should ALWAYS be working 100% in your best interest and should NEVER take any compensation from the other side.
Nic says
“I’m don’t know whether a broker that works for a marketplace should represent the buyer, seller, or be neutral.”
If I may, please..…why not?
The world over, a broker is an intermediary who represents neither party. Eg an insurance “broker” represents neither the insurer nor the insured, which is very different from an insurance “agent” who is a sales person for the insurer.
Perhaps Afternic should move to Texas. I don’t mind that they take 10% at both ends for “broker” sales. But it’s disappointing that their practice is to not say so (certainly not in any meaningful way, perhaps its hidden in terms somewhere). My experience is that, although well intentioned, the culture of Aftrenic broker sales is to mislead on this point.
Sedo seem to me to be by far and away more professional when it comes to walking this fine line.
Nic says
Andrew: If I may x2.
I like the central idea of this post very much; you could raise the bar here.
I don’t think the issue is that brokers are doing the wrong thing, I just don’t think many people have turned their mind to the issue.
A broker is a broker. An agent is an agent. Each comes with different duties.
Bob Fontaine says
As a Real Estate broker I would note that in Massachusetts, the difference between a broker and an agent is that an agent must work for a broker… but they otherwise act in the same capacity and have the same fudiciary duty.
Unless you hire someone to specifcally act on your behalf, I would assume at all times that they are working on the other person’s behalf.
That said, in most cases, where a the “broker/agent” is working on a percentage basis, you can pretty much figure they want the highest sale price possible.
Disclosure, while I have never met him, Mr Sequin who posts above me here, assisted me in the sale of a domain many months back.. and I would absolutely use his services again. *Happens to be located about a mile from me too – small world. Very.
My Blue Domains says
I hate using domain brokers.
I stopped some time back just because I felt they were playing both sides. Most come across as ingenuous and slimy.
Anyone with half-decent sales ability can do what these guys do anyhow.
Rob Sequin says
As with any industry there are good and not so good people.
You need to be comfortable with your broker, especially when you are dealing with intangible merchandise.
You can sell your own domains but good brokers have many potential buyers due to their experience in the industry.
Bob Fontaine says
I guess if your brother tells you he’s a domain broker – that day, and you hire him, you get what you should get.
On the other hand, if you do your due dilligence and hire a qualified domain broker, you’ll likely get a better result.
Slimy – I simply wouldnt hire someone who came across that way. There, problem solved.
Samit Madan says
You know what really dictates who the broker is working for – who the buyer and seller are.
If the buyer is a big company and the seller a relatively small fry, the marketplace rep will work with the buyer to squeeze the seller on price.
If the seller is a big company and the buyer a first time customer or someone who the marketplace has absolutely no connection, the broker will work on behalf of the seller.
I’ve had a marketplace ‘account sales rep’ squeeze me on price for a domain just because the buyer was msft.
Not only that, this broker/sales reps bad advice easily cost me $50k on my final value on the sale.
So beware, only person working for you is you.
Logan Flatt says
More folks need to read “Winning Through Intimidation” by Robert J. Ringer — ALWAYS have your own representation working for you in a deal, be it your own attorney or your own broker, and especially when the other party has their own representation.