What Do You Think: If You Sell a Name Outside of a Running Auction Do You Pay Commission to the Auction House?

Jan 02 2013

Elliot Silver (how ironic) reported today the sale of Silver.com for $875,000 to JM Bullion, a precious metals trader.  A great sum and the seller should be congratulated. There is only one problem.  There is still an auction going on at Flippa.com for his domain.    And this brings up the Question.

Why hasn’t the seller taken down the auction?  and Does the seller owe Flippa any kind of commission?  The first question is an easy answer in my book.  Yes the auction should be taken down. He knows he’s sold the domain so why continue on.  Most bidders have no idea that it’s already been sold.  If it meets reserve at the auction he/she is going to have a mess on their hands.  But canceling an auction is against Flippas TOS.  It states

You WILL NOT

cancel an Auction or Private Sale initiated by you (including any cancellation as a result of a termination of this Agreement) for the purpose of contracting separately with a Buyer you meet through Flippa.com which results in you avoiding paying Flippa any Fees (including a Success Fee). In these circumstances, without limiting Flippa remedies against you, Flippa may recover its lost Fees from you by suspending your User Account and/or deducting its loss from any Flippa Credits in your User Account.

The seller may be hoping that the auction doesn’t meet reserve therefore avoiding this problem but now that the sale is out in the open Flippa may still say that he’s broken the TOS. If someone does bid it up above reserve then legally there will be a problem because he’s agreed to this statement in the TOS

1 Legal Status of Agreeing to Sell a Website

  1. When a Seller agrees to sell a Website to a Buyer (whether by way of Auction or Private Sale) and the Buyer agrees to purchase that Website, then that agreement for the sale of the Website (“Sale Agreement”) will be legally binding on both the Seller and the Buyer

So that being said. Does the seller owe Flippa money?  I think they do for two reasons.  Flippa certainly gave them part of the publicity that got them the sale. Yes, others were brokering the name. Elliot pointed out that Sedo was trying to move the name.  But he didn’t start an auction there. He started it at flippa.  It was at the top of most active, and highest priced for a week or so.  Secondly, canceling an auction or selling before the end makes Flippa look bad. It harms the platform by putting in doubt to a bidder. Doubt that they auction will go to the end or even if they win they may not get the name.  Godaddy has been battling that doubt for years.

But this is my opinion and maybe I’m misguided.  I hate to throw negativity on a great sale like this but it’s a very valid question and something that has happened in the past and probably will happen in the future.

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Outsmarting the Dumb, Outworking the Smart

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8 comments

  1. Mike

    My best guess is that the person who listed the auction on Flippa is another broker, and not the actual owner.

    – the username is ‘websitebroker1’
    – in one of the comments they state, “As for the Reserve – this will not be disclosed but any and all serious bids will be considered by the seller at the end of the auction.”

    Why did he refer to the seller in the third person? That tells me he’s not the owner.

    It’s possible there’s more to this story, for example supposing the broker didn’t stop the auction because they weren’t aware the domain had been sold (i.e. if the buyer contacted the owner directly and they decided to cut out the broker). Purely speculation at this point.

  2. Mike

    IMO, whoever sold this domain owes FULL commission to Flippa, anything less is unacceptable. I am noticing that Flippa is quickly becoming the major player in online property sales, my company is using this platform almost exclusively in 2013.

  3. Neil Armstrong

    That’s perhaps (if the seller names are indicative) a bad example, but in a perfectly moral world, what *should* sellers do? Morally, it might seem easy in this case to peel off a fraction of $875K to Flippa if it really is Elliot selling directly, but how many of us list domains at multiple locations and then remove every other “For Sale” location when we receive the first offer?

  4. Elliot Silver

    Neil – I had no part in the transaction of this domain name. I received information from the buyer announcing the sale and posted it on my blog.

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