Sunday 1 September 2013

Why Use Escrow Over Paypal When Buying and Selling Websites on Flippa?

  
VS 

Obviously, I wouldn't recommend using escrow for low amount transactions becuase it will end up costing you more money.

Remember This: Escrow charges around $40 for transferring money to your bank account.

I would only recommend using Escrow for transactions over $500.

Lately, I've been very good at preventing fraud that I upped that amount to $5,000.

I will cover my methods of preventing fraud in another article. So for now let's discuss why using Escrow is safer than Paypal for both buyer and seller.

Paypal works as a payment processing like credit card companies. So all they are obligated to do is collect the payment, verify that the payment is legitimate through their automated verification software. And in case of dispute, they want the buyer to provide proof that the tangeable goods we're in fact delivered to the buyer.

The issue becomes more complicated for buying and selling websites becuase there is no Tangeable Goods to deliver. Websites and Domains are virtual.

So Paypal have not real business in getting involved with any disputes when it comes to virtual goods sale.

Basically, I've face a few scenarios that went my way and the buyer's way.

Paypal Scenario #1: Buyer Files a Chargeback

This is a very common occurance for flippers on Flippa. Sometimes a buyer will use a stolen credit card and pays for the site using it. The real owner receives the bill at the end of the month and calls the credit card company to reverse the transaction.

Of course, Paypal would like to be on the credit card company's good side so they will honor the chargeback and take the money from the Seller's account.

When this haapened to me, it was for $3,500 and it put my Paypal account to negative.

I argued the chargeback but of course, Paypal already gave the credit card company their money back so it was pointless.

I have not met sellers that have won got their money back from buyer's filing chargebacks with their credit card company.

So I definitely learned a hard and expensive lesson there. Not only that I lost the funds, I also lost the website and the domain.

I tried to get the domain back but was unsuccessful. Once it's transferred to another account, there is very little thing you can do to get it back. Godaddy only told me that I should contact an internet lawyer. :-) Yes. This is what Godaddy told me even though I transfered the domain to another Godaddy account they were still unable to reverse the transfer becuase it's not their business to get in the middle of a dispute.

So you definitely have to be careful accepting Paypal payment becuase even legitimate buyers will play dumb with their credit card company and pretend they did not authorized the transaction.


Paypal Scenario #2: Buyer Files "Item Significantly Not As Described"

You have no idea how common this is in the world of selling websites in Flippa.

Buyer asks no questions, wins your auction, pays immediately via Paypal. Sound great right? A perfect buyer?

Well. When this happens, it usually throws a red flag on my fraud meter. I've become good at this I can smell it from a mile away. :-)

Obviously, not every buyer means bad for you. Some are just really no bs type and want the site without any questions.

So let's just discuss the bad ones.

Usually buyers that do this have an intent to try to exploit Paypal's no-care-for-seller-of-virtual-goods attitude to their advantage. These Flippa cowboys want a copy of your site and don't want to pay you a cent for it.

So they win the auction and pays for it immediately. So you transfer the domain and website and once they have it in their control, they dupe it and file and dispute on Paypal as "Item Significantly Not As Described" in an effort to get their money back and return to your the domain and the website.

The good news for sellers is, Paypal gives no protection to Buyers buying Virtual Goods. So even if the item you sold is "really" not as described, the disputed will be resolved to buyer's favour.

Where this becomes a huge issue is when naive buyers purchase a site that have fake traffic and revenue stats.

Just remember it is not Paypal's job to determine who is right or wrong. So before you purchase something do your due deligence to ensure the stats and reveue claims are real.

So why Escrow provides more Buyer and Seller Protection than Paypal?

Obviously, I wouldn't recommend using escrow for low amount transactions becuase it will end up costing you more money.

Remember This: Escrow charges around $40 for transferring money to your bank account.

I would only recommend using Escrow for transactions over $500.

Lately, I've been very good at preventing fraud that I upped that amount to $5,000.

I will cover my methods of preventing fraud in another article. So for now let's discuss why using Escrow is safer than Paypal for both buyer and seller.

Paypal works as a payment processing like credit card companies. So all they are obligated to do is collect the payment, verify that the payment is legitimate through their automated verification software. And in case of dispute, they want the buyer to provide proof that the tangeable goods we're in fact delivered to the buyer.

The issue becomes more complicated for buying and selling websites becuase there is no Tangeable Goods to deliver. Websites and Domains are virtual.

So Paypal have not real business in getting involved with any disputes when it comes to virtual goods sale.

Basically, I've face a few scenarios that went my way and the buyer's way.

Paypal Scenario #1: Buyer Files a Chargeback

This is a very common occurance for flippers on Flippa. Sometimes a buyer will use a stolen credit card and pays for the site using it. The real owner receives the bill at the end of the month and calls the credit card company to reverse the transaction.

Of course, Paypal would like to be on the credit card company's good side so they will honor the chargeback and take the money from the Seller's account.

When this haapened to me, it was for $3,500 and it put my Paypal account to negative.

I argued the chargeback but of course, Paypal already gave the credit card company their money back so it was pointless.

I have not met sellers that have won got their money back from buyer's filing chargebacks with their credit card company.

So I definitely learned a hard and expensive lesson there. Not only that I lost the funds, I also lost the website and the domain.

I tried to get the domain back but was unsuccessful. Once it's transferred to another account, there is very little thing you can do to get it back. Godaddy only told me that I should contact an internet lawyer. :-) Yes. This is what Godaddy told me even though I transfered the domain to another Godaddy account they were still unable to reverse the transfer becuase it's not their business to get in the middle of a dispute.

So you definitely have to be careful accepting Paypal payment becuase even legitimate buyers will play dumb with their credit card company and pretend they did not authorized the transaction.


Paypal Scenario #2: Buyer Files "Item Significantly Not As Described"

Firstly, Once transaction is completed, there is no reversing it. That is enough for sellers to have better sleep at night knowing the money they earned is theirs and no one can take it away.

As for buyer protection, Escrow allows you to have inspection days to even 15 days as long as you and the buyer agreed to this.

During this inspection, you will have the oportunity to review the website thoroughly and if you are 100% satisfied, you then notify Escrow the transaction is complete.

You as a buyer have the power to ensure you get what you paid for.

Of course, you have to provide these details on the terms clearly to make sure that in case there is a dispute, you have something for Escrow support to refer to.

If the website seller claims the website is receiving an average number of Organic Traffic on a daily basis and making an average x-amount of dollars, then you should add this into the terms so you can verify it during inspection period.

Well. I hope that helps.