Greg Elfrink

May 23, 2016

One of the most common questions we get is why we ask for a deposit before a buyer can see the actual website on our marketplace. Why do we do this? We want you to buy the websites, so why are we creating this extra obstacle for you to get through?

At the outset, it seems like a hassle.

As counterintuitive as it sounds, it’s actually for your protection. Our deposit system protects your potential investment in a new website for a plethora of reasons, which I’ll explain in this post.

Why Don’t Other Brokers Charge a Deposit?

Letters of Intent

Letter Of Intent

Other brokers are set up a bit differently than us. Instead of a deposit, many use a Letter of Intent (LOI) as their “deposit,” which then allows them to proceed in sharing the actual website with the prospective buyer. An LOI is basically a legal document that indicates your intention to purchase that website.

Most of the time, these LOIs are exclusive as well. Exclusive LOIs can significantly increase the amount of time it takes to sell a website, and it also takes sites off the market so that other, more serious buyers cannot even view the listing of the site, much less the actual site. Since many exclusive LOIs can last for 30 days or more, you can imagine how much this can extend the buying and selling processes for each site.

Just two buyers looking at a website exclusively would take at least two months. In contrast, the depositing system allows for instant access where any number of serious buyers can make a deposit and get access to the site instead of having to wait for another buyer’s LOI to run out.

Not all LOIs are exclusive like this, but even non-exclusive LOIs have their share of issues.

For example, a non-exclusive LOI still needs to be manually approved before they allow you to see the website, causing delays and lowering interest. Whereas, after making a deposit at our brokerage, you are automatically approved to check out the website you are interested in.

With a non-exclusive LOI, you could spend all that time filling out a mountain of paperwork, sending screenshots of your bank accounts, etc., and still not be able to see the website you are interested in purchasing.

Having an LOI doesn’t mean that the sale is complete. If such a letter were the only thing needed to close the deal, there would not be much of a reason to have the document in the first place.

In fact, an LOI is a non-binding agreement. No matter the intention or the offer placed on the document, neither party is held to the agreement down the road, which opens up bargain hunters to signing an LOI and then negotiating at a later date.

The LOI is an instrument that gives a buyer some peace of mind while they make financial arrangements to complete the purchase, but it doesn’t mean that either party involved in the deal won’t have second thoughts.

Auctions

Website Auctions

Besides the LOI system for beginning the sale process, there is the auction system, which other companies use and promote. Many people really love this style — it is fun to bid on websites and potentially get a good deal.

Although, you have to be careful if you find yourself in a bidding war, as that excitement could cause you to pay much more than you meant to.

The main problem with auction sites is that they’re not very safe for the buyer. Most auction sites show the website in its full glory with no detail hidden. This means everyone, even the people not bidding on the website, can see exactly what the website is and how it was made.

Copycat marketers can simply steal those keywords, content, and pretty much everything else and set up the exact same kind of site without even putting a bid on the auction listing. When this happens, the auction system facilitates the success of the buyer’s competitors before the deal is even closed.

When it comes to finding more fully fleshed out businesses to buy, you will be hard-pressed to find them on these auction-style sites. While it is harder for a copycat to clone a drop-shipping business or a SaaS product with good brand recognition in the market, an auction site opens these styles of business up to other problems.

Competitors may spot their auction listing and be able to learn more details about their business, which could give the competitor the upper hand.

It’s unlikely you’ll find high-quality, hard-to-copy businesses on auction marketplaces because very few skilled entrepreneurs are willing to see the business (into which they have invested so much blood, sweat, and tears) get auctioned off to the highest bidder.

Auction sites can put a lot of pressure on the would-be buyer, and that added pressure to make a deal should make a buyer hesitate before deciding to shop at an auctioning brokerage.

In fact, this kind of pressure is the reason we started selling sites in the first place! Many of our buyers were sick of the copycats, who are naturally attracted to the auction platforms, and asked if we could sell directly to them.

There is another reason why auction systems are not the safest for the buyer: the vetting process.

Very few auction-style marketplaces do any vetting at all. This speaks to the values of their business model. They make their money on volume, not quality. Injecting a vetting process for quality control would significantly decrease their bottom line and isn’t feasible.

With nobody checking or vetting the listings, websites that are low quality or outright scams get listed on these types of marketplaces quite often. The lack of communication that is common on these sites also makes it difficult for the buyer to verify earnings, traffic, and the other important metrics of the website.

All of these factors are why the deposit system is actually the better system. It protects the buyer and speeds you through the process to make the entire experience one smooth transaction.

Let’s dive into why a deposit system makes sense (and why the deposit process is better in many cases).

How Deposits Protect Future Site Revenue

Website Deposit

The internet is full of people looking for the (non-existent) “shortcut” to riches and wealth.

What easier way to success is there than finding a website that is actually earning money, taking that content, and creating a different website that is exactly the same? You might have to change up the content a little bit for the copycat site to outrank the original site, but, overall, the process is pretty easy.

Not only will these copycat marketers take all the content from a website that is being sold, but sometimes they will perform negative SEO on the website, too. The negative SEO kills all of their rankings and allows their new copied site to take over the spots that the original website lost.

Here is an example of copycat marketing. This is a screenshot of a Google search, “Dr. Drum Review,” a very well-known affiliate product belonging to Clickbank.

Deposit System

While these websites most likely weren’t created by people looking at websites being sold, it serves as an example of how copycats can drastically increase the competition.

If a seller’s website were open for anyone to view, there would be plenty of people with the motivation to copy that website’s exact keywords, content format, and affiliate links. This would put the website at risk.

If for whatever reason the seller couldn’t get his website sold, that seller is now in danger of copycats moving in on his website’s traffic. If a buyer buys the website, without the deposit system, they will have to deal with a litany of copycats, which may also be out to damage their website using negative SEO.

When a website does sell, these copycats are paying attention, and they are even more likely to try and copy that site because it now has proven worth in the marketplace.

Given the risks posed by copycats, our deposit system offers considerable advantages when compared to the auction or a Letter of Intent system of other brokerages.

The Logic of Deposits

The deposit system attracts great sellers. Sellers know that very few people are going to put a deposit down unless they are serious. This is great for buyers, too, as they know they are going to be looking at higher-quality websites than those found in other marketplaces.

The deposit system creates a win-win situation for the buyer and the seller. The seller gets quality buyers, and the buyers find quality websites and online businesses being sold by the sellers.

The deposit system is prohibitive for copycats who just want to see profit-producing websites that they can copy and paste as their own, and they are unlikely to put down money on a site they don’t really intend on buying. Unlike submitting an LOI, it is more difficult for a scammer to deposit money. It’s easy for a scammer to PhotoShop a bank account when they send the information over to a brokerage to get an exclusive LOI on a website.

The kid in his parents’ basement is going to have a difficult time putting a deposit down when he doesn’t even have access to capital. Also, the deposit avoids the copycats in developing countries who have no intention to buy anyway, since most of these copycat marketers don’t own a credit card to put down the money.

All that being said, there is a small percentage of people that will simply never be okay with putting a deposit down on a website they are interested in buying.

We understand that, and we are totally okay with it.

Out of that small percentage, the majority will end up loving our process once they learn more about it or go through it. The people that still don’t want to do it — even after learning why the depositing system really works in their favor — tend to be a percentage of a percent.

Though this small group has some legitimate concerns, it’s mostly would-be copycat artists among the group who are totally against deposits.

We are willing to miss out on the business of the more cautious potential customers if it eliminates those fake buyers who cause problems for our sellers. (and buyers, ultimately)

To Deposit or Not to Deposit

A marketplace that requires deposits is not your only option. There are plenty of brokerages that require an LOI, and auction-style websites are available to you as well. We just think that deposits are the best for the reasons we talked about above.

Ultimately, it is your decision whether you think a website is worth depositing money on to see the full details. It is also worth noting that our deposits are 100 percent refundable in the event you decide the site is not for you.

The deposit system is the safest mechanism around in protecting a site’s future revenue from scammers and copycats, while also making the entire sales process go as fast and smooth as possible.

We believe that, even if you currently don’t love the idea, you will once you go through the process.

If you haven’t checked out our marketplace, click here to take a look at our current listings.

Your ideal profit-producing website might be just a deposit away.


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Discussion
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  1. Dave says:

    How fast and through what method do you return deposits should a website not be bought, to a non-US buyer (eg NZ)? Do you ever not return deposits?

    • Justin Cooke says:

      Hey, Dave – thanks for asking!

      Whenever a depositor requests their deposit back, we return it (typically) within 24 hours through the same method they paid. It can take 2-3 days after that to see it show up in their account.

      There are situations where we don’t return the deposit – when the buyer asks us to hold the funds for a future purchase. In a couple of instances we’ve held the money for a few months and, when the depositor was no longer on the market, we refunded the money.

      Even when a depositor DOES agree to purchase a site, we refund the deposit and have them pay the full amount for the purchase via wire.

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