Escrow & Safe Transfer
Domain escrow services in New Zealand act as a neutral third party that holds funds during a domain transaction. They ensure the buyer receives the UDAI code and legal ownership before releasing payment to the seller, effectively eliminating fraud and financial risk for both parties involved in high-value digital asset transfers.
In the high-stakes world of digital real estate, securing a premium .nz or .com domain is akin to purchasing physical property. However, unlike physical real estate, the transfer of digital assets happens instantaneously and, often, anonymously. This creates a significant risk profile for New Zealand businesses looking to acquire the perfect web address. Whether you are a startup securing your brand or an investor purchasing a premium keyword domain, understanding the mechanics of domain escrow services NZ is critical to protecting your capital.
What Is Domain Escrow and Why Is It Essential?
At its core, domain escrow is a financial arrangement where a third party holds and regulates payment of the funds required for two parties involved in a given transaction. It helps make transactions more secure by keeping the payment in a secure escrow account which is only released when all of the terms of an agreement are met as overseen by the escrow company.
For New Zealand businesses, the digital economy is borderless. You might be buying a .co.nz domain from a seller in Auckland, or a .com from a seller in New York. In either scenario, trust is the primary friction point. The buyer does not want to send money without a guarantee of receiving the domain, and the seller does not want to transfer the domain without a guarantee of payment.
Why Never to Use Direct Bank Transfer for Domains?
One of the most common mistakes Kiwi entrepreneurs make when acquiring a domain privately is agreeing to a direct bank transfer or a PayPal “Friends and Family” payment. While this avoids fees, it exposes you to catastrophic risks.
1. Irreversibility of Payments
Once a bank transfer is executed in New Zealand, it is difficult to reverse. If you transfer $5,000 for a premium domain and the seller ghosts you, your bank’s fraud team has limited power, especially if the funds were moved to an overseas account immediately. Unlike credit card chargebacks, bank transfers are treated as cash payments authorized by the account holder.
2. The “Push” vs. “Pull” Dynamic
Domain transfers are a “push” mechanism. The seller must actively push the domain to your account or provide the authorization code. If you have already paid, you have lost all leverage. A scammer can simply take the money and claim they sent the code, or stop responding entirely.
3. Lack of Purchase Protection
Standard payment gateways often exclude “intangible goods” or “digital assets” from their buyer protection policies. This means if a dispute arises regarding the ownership history or a trademark lien on the domain, you have no recourse through the payment processor.
How Escrow.com Works for NZD Transactions
Escrow.com is the global industry standard for domain transactions and is widely used by New Zealand brokerages. While it is a US-based entity, it facilitates transactions globally. Here is how it functions specifically for a New Zealand context.
Currency Considerations
Most standard domain transactions are denominated in USD. If you are a Kiwi buyer purchasing from a Kiwi seller, you may still find yourself using USD as the base currency on the platform. However, Escrow.com does support Euro and other major currencies. For NZD, you typically have to account for foreign exchange (FX) fees. It is crucial to calculate the conversion rate before agreeing on a final price to ensure the budget aligns with the actual deduction from your NZ bank account.
The Escrow Workflow
1. Agreement: Buyer and Seller agree to terms (price and domain name). The Buyer or Seller initiates the transaction on the escrow platform.
2. Deposit: The Buyer transfers funds to the Escrow account. The Escrow service verifies the funds are secured.
3. Notification: The Seller is notified that funds are secured and is instructed to transfer the domain.
4. Transfer: The Seller transfers the domain to the Buyer (using the UDAI or authorization code).
5. Inspection: The Buyer confirms they have control of the domain. There is usually a set “inspection period” (e.g., 1 to 3 days).
6. Release: Once the Buyer accepts the domain online, the Escrow service releases the funds to the Seller.
Understanding UDAI Codes and Registry Transfers
In the New Zealand domain market (specifically for .nz, .co.nz, .net.nz, etc.), the linchpin of the transfer process is the UDAI (Unique Domain Authentication ID).
What is a UDAI?
The UDAI is an 8-character password generated by the domain registrar. It is unique to that specific domain name. Possession of the UDAI effectively grants the ability to transfer the domain from one registrar to another (e.g., from Metaname to Crazy Domains) or to change the registrant details.
The Role of the UDAI in Escrow
When using an escrow service, the “delivery” phase of the transaction is defined by the successful use of the UDAI. The seller must generate a valid UDAI from their registrar portal and provide it to the buyer. The buyer then enters this code into their own registrar account to “pull” the domain in.
Critical Security Note: A UDAI is valid for 30 days. If you are the seller, never share the UDAI until the escrow service confirms they are holding the buyer’s funds. Once the buyer has the UDAI, they can take the domain immediately.
Legal Ownership Transfer & Contracts
While the technical transfer involves moving the domain between accounts, the legal transfer involves updating the “Registrant Name” in the official registry database. In New Zealand, the .nz registry is managed by InternetNZ.
Registrant Contact Details
Simply having the domain in your account is not enough. You must ensure the WHOIS data (or the private registry data) reflects your legal entity. If you buy a domain but leave the old owner’s name as the “Registrant,” they technically still own the domain according to InternetNZ policy.
The Domain Purchase Agreement
For transactions over $2,000 NZD, it is highly advisable to have a separate Domain Purchase Agreement (DPA) alongside the escrow transaction. The escrow service handles the money and the asset swap, but a DPA covers liabilities, trademarks, and warranties.
A DPA should include:
- Warranties: The seller warrants they have the right to sell the domain and it does not infringe on third-party trademarks.
- Indemnification: Protecting the buyer from future lawsuits regarding previous use of the domain.
- Non-Compete: Preventing the seller from registering a confusingly similar domain (e.g., selling plumber.co.nz and immediately buying plumbers.co.nz).
Step-by-Step Guide to a Safe Transfer
To ensure a seamless acquisition of a New Zealand digital asset, follow this checklist.
Step 1: Due Diligence
Before engaging an escrow service, verify the domain’s history. Use the Wayback Machine to check for past spam content. Check the Domain Name Commission (DNC) website to verify the current registrant status.
Step 2: Set Up the Transaction
Create an account on a reputable escrow platform. Input the specific domain name and the agreed price. Select who will pay the escrow fees (Buyer, Seller, or Split 50/50). In NZ, it is common professional courtesy to split the fees, though in a seller’s market, the buyer often pays.
Step 3: Verification and Funding
The buyer wires funds. For NZ buyers, international wire transfers can take 1-3 business days to clear in the escrow account. Do not panic if it is not instant.
Step 4: The Handover
Once funds are secured, the seller logs into their registrar (e.g., GoDaddy, Freeparking, 1st Domains) and unlocks the domain. They generate the UDAI (for .nz) or the EPP Code (for .com). They provide this code to the buyer via the escrow platform interface.
Step 5: Acceptance and Closure
The buyer initiates the transfer at their registrar. Once the domain appears in the buyer’s account, they must log back into the escrow site and click “Confirm Receipt” or “Accept Domain.” This triggers the release of funds to the seller.
People Also Ask
Is Escrow.com safe for New Zealand transactions?
Yes, Escrow.com is the global standard for domain transactions and is considered extremely safe for New Zealand users. They are a licensed escrow company that undergoes regular audits. While they primarily operate in USD, they facilitate transactions between NZ parties securely, ensuring funds are not released until the domain transfer is verified.
What is a UDAI code and where do I find it?
A UDAI (Unique Domain Authentication ID) is an 8-character authorization code required to transfer .nz domains. If you are the seller, you can generate this code by logging into your account with your current domain registrar (like Crazy Domains or Metaname). It acts as the password for the domain’s movement.
How much does domain escrow cost?
Escrow fees typically range from 0.89% to 3.25% of the transaction value, depending on the price of the domain and the payment method used. For a standard transaction under $5,000, the fee is usually around 3.25% ($25 minimum). High-value transactions often enjoy lower percentage rates.
Can I use PayPal for domain purchases in NZ?
While you can use PayPal, it is not recommended for high-value domain transactions due to the lack of specific protection for digital goods transfers. PayPal’s dispute resolution process is not designed for the complexities of domain ownership transfers, making dedicated escrow services a much safer option.
How long does a domain transfer take in NZ?
For .nz domains using a UDAI code, the technical transfer is often near-instantaneous once the code is entered. However, the full escrow process—including funding via wire transfer, verification, and the inspection period—typically takes between 3 to 7 business days to complete fully.
Is domain flipping legal in New Zealand?
Yes, buying and selling domains for profit (domain flipping) is legal in New Zealand. However, you must avoid “cybersquatting,” which involves registering trademarked names in bad faith to sell them back to the trademark holder. This can lead to disputes via the Domain Name Commission’s Dispute Resolution Service (DRS).
