What happens if you transfer the content, database and domain and the buyer says it is not satisfactory and refuses to finish the transfer of money? Then, the buyer will have all of the content and database (which is worth quite a bit) and the seller does not get any money.
Also, what if the buyer is not in the same country? How can you legally enforce an agreement?
These seem like legitimate problems and very easy ways to get scammed when selling a website.
I would appreciate some feedback if you have any ideas on this. How do you prevent it from happening? Should you ask for all money upfront before transfer?
Do you know how escrow works? They hold the money prior to you releasing the information, in these types of cases if you can prove they kept the database you'll recieve the money.
Right, but what I am saying is that even if the buyer gives the database back, it doesn't matter much, since they can easily copy it. Also, if you could take some type of legal action, what woudl that look like outside of the United States (or other developed nations)?
Yes, you can get scammed when using escrow.com. Big time. It happens a lot.
If you're selling software, code, databases etc., you should consider an escrow company specialised in that area. See this post.
I don't think any escrow service can prevent someone from keeping a copy of content and database and using it in a future project. It is wise to consider contingencies in case a transaction goes wrong. Is there a specific situation you're asking about, or is this theoretical?
peter, escrow companies like escroweurope take delivery of the software/code/database and have tech experts to check that it matches the requirements. A general purpose escrow company like escrow.com is, as you say, unable to prevent skimming.
Right, but escroweurope would be guaranteeing that the buyer actually takes delivery of the data (software, database, or whatever) and that the data is as described. They couldn't guarantee that the seller is not secretly keeping a copy of the data with the intention of using it in future projects.
I am selling a site, which is why I brought up the issue, but it seems like a real problem when selling to buyers (or buying from sellers) who are from a less developed country. There is no real way to enforce property rights, and even if there were, it would not be worth it for most of the smaller transactions.
Does this mean that really knowing your buyer is important unless he or she is willing to pay up front?
Well, it may be less important to you, if money is your sole concern in the sale. In some of the deals that I do, where a community is involved, money isn't the sole concern so knowing the buyer is important. If you have any other concerns that just money, not knowing how you will enforce conditions of a contract might make you less willing to sell to someone in a foreign country.
They couldn't guarantee that the seller is not secretly keeping a copy of the data
I understood that the OP's problem was more a case of the buyer taking delivery and then not paying. In any event, escroweurope is a safer bet for code and database transfers than escrow.com as they are a neutral third party who have a copy of not just the agreement but the actual code / db in question should you wish to threaten legal action later.
rnschmidt, you are right in that it's usually not worth pursuing in a legal action, not at least for the sub $30K sites that are the backbone of Sitepoint. That applies to all buyers whether they're in your own country or not. But I'm not sure about the buyer paying in advance; why do you presume a buyer would treat you with a higher level of trust than you treat him?
The whole idea behind escrow is that FIRST the buyer sends the money to Escrow.
Escrow sits on that money.
After that, you *the seller, are expected to finish YOUR end of the bargain.
Once you've done that, Escrow sends you your money...(and deducts a fat amount as fee - for itself).
FruitMedley Post: I think you are right in that trust needs to be there for both the buyer and the seller. I hired a programmer about a year ago and we had the same trust issue. I wanted to get past the issue and show the coder I was willing to trust him. I send $150 and the guy disappeared.
The second time I hired a programmer I sectioned the project off into 3 parts. After part one was complete I send one-third of the payment. I continued this until the project was finished. I believe this was a good structure to keep the programmer motivated and to keep me happy. My worst case scenario was that I had partial code and I could hire someone else to finish it up. In the end it worked out and I have worked on many project with this person (trust is no longer an issue).
I wonder if there is a way to do this with a website? Perhaps you could transfer content, code and domain, and get three equal payment.
Ultimately, it seems like it would be very beneficial to have a small exclusive network of buyers and sellers in developed countries. Maybe this is a model that could work for bigger sites?
Ultimately, it seems like it would be very beneficial to have a small exclusive network of buyers and sellers in developed countries.
Some of the people I trust the most are people living in places that wouldn't be in your list of "developed countries". But this is not a political debate so let's not take the discussion down that road.
If you are dealing with what you consider a larger amount of money, and you've put a lot of work into the site, it only makes sense to sell the work to someone that will care about the site. Spending a little time getting to know the person, and discussing their plans for the site may be helpful, and may also help you to identify a scammer. If they don't want to chat with you, or get to know you, that could be a warning sign.
yeah if you are buying proprietary software or apps that seller can remake it as he still has it and resell it to another person.
Same thing with site content.
Of course you can get scammed with a escrow system in place. You can even get scammed by your neighbour!
Escrow only provides a bit more of security for both the buyer and the seller, but that doesn't mean that, as you said, you can't get scammed. But as a seller, you know that the buyer has the money to pay for your work. Without the escrow system, you would never be really sure if he had it or not.
If you have used a escrow system, you must open an enquiry so that it gest investigated. Mind you, this doesn't mean that you will get paid, or that the buyer will not keep a copy of your work. But at least, the buyer will be in the spotlight. If everybody does this, he will be rejected by the company handling the escrow, and he will have to go somewhere else.
If the agreement is in written, you can enforce it with a lawyer. Most of the times, it is a waste of money and time, though. The amount of money to spend can be multiplied if the law process needs to be taken to the courts where the scammer is, and not your country.
It is very easy to get scammed in the tradicional market, too. And it goes both ways, as a seller, the buyer may scam you. But there are thousands of cases where the person scammed was the buyer, paying up front but not receiving his goods.
There is no real way to prevent this, but a written contract and payment by parts is an option, and it normally minimized the losses.
Also, you need to study the person/company you are going to work with, and gather as much information as you can to verify if he is a legit customer/provider.
Even with traditional ways of doing business, all the business is a matter of trust, and the only way people will trust you is by getting a good reputation. If you are the buyer, people will look at your payment record, if you are a seller, previous works.
Not much that we can do about it, really.
Being a website broker, I've encountered many similar problems. Luckily, they were all solved with a mutual agreement of buyer and seller, me being a representative.
In most cases, it actually turned out to be a misunderstanding. However, in one case, buyer did copy the database, and said that he will release the clone of the website. Having the website's value of over $50,000 , it would be quite an impact on my seller's profile.
The seller, with me as a witness, sent the buyer (who was from Pakistan, by the way) a pre-warning, in which case he will sue him in front of the International Court of Justice. My opinion is that scared the buyer (who turned out to be a juvenile), and he didn't take any action that could potentially jeopardize my seller's existence on the Web.
This is what i do when i sell websites.
I tell them before the escrow process that once the domain is transfered they have to accept the transfer of domain so that i get the money. once i get the money. I give them the database and the site pages. It always worked in my case.
I'm more worried about my money than a copied database. Copying happens but I have no idea how that would be prevented.
There are no "fail safe" systems.
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