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domains How should auction houses handle non payment by the winning bidder?

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equity78

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How should auction houses handle non payment by the winning bidder? Back on October 29, I wrote about Kau.com closing at $100,350 at DropCatch. That bidder did not pay, it's being reauctioned. Is that the right way to handle things? I have written many times on how DropCatch and NameJet have benefited by GoDaddy failing to secure payment. Koupons.com closed at $6,100 on 8/17/20 at … [Read more...]
 
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The views expressed on this page by users and staff are their own, not those of NamePros.
There is a lot an auction house can do to control shill bidding. Has a user bid that high before? Is it a new account? They could put limits on how high a user can bid on an auction, or ask them for some security/pre-payment, or have they paid for similar auctions? Have they ever reneged? Outright 100% ban on every shill bid that goes unpaid, or every shill bid (like the second bidder in your example). I'm not saying they will be able to eliminate shill bidding. But items like you example are easy to spot.

Stub I think there were some commenters on TheDomains in a previous article who claimed they did pull this off.

I don't know that they are all easy to spot unless you do it all the time. I would never engage in this kind of behavior. But for a name like KAU.com I know how I could pull it off and it would never be uncovered.

Look right now each place handles it differently.

GoDaddy sometimes second bidder sometimes let it drop
DropCatch reauction
NameSilo Account balance required
Dynadot next highest bid
NameJet does do some verification for prices over a certain price
 
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If a winning bidder fails to pay. Hmmm.

I think the auction houses should credit qualify buyers for high end auctions and provide a line of credit up to what they qualify for. Perhaps have an interest free period to pay the credit line in full. Otherwise, bidder wins auction, seller is paid automatically via buyers auction house credit line, buyer pays off the line or pays interest. Auction house handles their own collections.

Just my take.
 
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Stub I think there were some commenters on TheDomains in a previous article who claimed they did pull this off.

I don't know that they are all easy to spot unless you do it all the time. I would never engage in this kind of behavior. But for a name like KAU.com I know how I could pull it off and it would never be uncovered.

Look right now each place handles it differently.

GoDaddy sometimes second bidder sometimes let it drop
DropCatch reauction
NameSilo Account balance required
Dynadot next highest bid
NameJet does do some verification for prices over a certain price

For auction houses who are dealing with shill bidders every day, and hopefully it is in there interests to control them, should recognize shill bidding most of the time, and put some kind of brakes on this activity. I don't think they put enough energy into this process. We of course would like that all auction houses to handle this winning bidder dropping out similarly. But they are free to handle this how they like when the winning bidder drops out. We can decide whether we like or dislike their processes.
 
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If a winning bidder fails to pay. Hmmm.

I think the auction houses should credit qualify buyers for high end auctions and provide a line of credit up to what they qualify for. Perhaps have an interest free period to pay the credit line in full. Otherwise, bidder wins auction, seller is paid automatically via buyers auction house credit line, buyer pays off the line or pays interest. Auction house handles their own collections.

Just my take.

If a shill bidder is going to bid on an auction. Won't they just say thank you very much for financing and validating my bid? I can see how establishing a line of credit might give them to pause for thought though :)
 
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I don't think they put enough energy into this process.

Exactly, that's the problem. Why one day does GoDaddy go to the second bidder and on another day they don't?
 
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Exactly, that's the problem. Why one day does GoDaddy go to the second bidder and on another day they don't?

I think that is pretty easy to imagine. It might take too long to establish that the winner isn't going to pay, and then there is no time, or very little time left for the second place bidder to pay. Or the 2nd bidder declines, and no time left to ask the 3rd or more bidders. GoDaddy could renew the domain pending sale, but that could lead to a whole other string of accusations that they are registering for themselves, IMHO. In any case the winner should be automatically barred from their auctions. I sometimes really wonder if they are doing that? For example, if DropCatch were the winner and they didn't pay because of a glitch, are they going to ban them from their auctions? I doubt it. Because they are too valuable to lose them as a bidder. They should. What's good for the goose is good for the gander :)
 
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If a winning bidder fails to pay. Hmmm.

I think the auction houses should credit qualify buyers for high end auctions and provide a line of credit up to what they qualify for. Perhaps have an interest free period to pay the credit line in full. Otherwise, bidder wins auction, seller is paid automatically via buyers auction house credit line, buyer pays off the line or pays interest. Auction house handles their own collections.

Just my take.
a credit line sounds good, based on a real credit report from a separate company, but I'm not sure if a credit line should be based on in-house.
 
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The next highest bidder was effected by fake bids.
 
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The next highest bidder was effected by fake bids.

Yes, how far down the chain do you go to find an honest bidder who wasn't conned into bidding against a shill bid?
 
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Yes, how far down the chain do you go to find an honest bidder who wasn't conned into bidding against a shill bid?
And test run was a success so lift price for next run.
 
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And test run was a success so lift price for next run.

That's a good point.
The auction has garnered free publicity.
Should a re-auction adhere to the reserve and conditions as set during the previous auction?
 
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That's a good point.
The auction has garnered free publicity.
Should a re-auction adhere to the reserve and conditions as set during the previous auction?
No solution that doesn't involve credit scoring which would dilute most of customer base. Eg loan like casino
 
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It might take too long to establish that the winner isn't going to pay,
how about they auto charge if u win and if it fails u have 12 hours? Right now they make u manually checkout
 
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It requires 100% to cover bids, but you can actually spend that on registrations and renewals in between bidding and winning auctions, so when the auction closes you may not have enough, and have to pay the rest.

They are now giving lines of credit at NameSilo upon request so you do not have to prepay. This has been going on since last month.
 
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They are now giving lines of credit at NameSilo upon request so you do not have to prepay. This has been going on since last month.
That's great to know. I think it is a wise structure.
 
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The problem with registars like GoDaddy, DynaDot, Snapnames, etc. is that virtually anyone can bid, and they treat a $50K domain auction win with the same business processes as a $5/month hosting plan.

Into the Cart it goes, they have XX days to pay, no requirement for a CC or other payment method, lax collections, etc., so by the time the deadbeat hasn't paid, there is little time left to resell or reauction it to anyone else.

That's why so many unpaid domains end up expiring and get caught by drop-catchers, and as I've said before, it wouldn't surprise me that some "outside players" are actually manipulating these expired auctions.

Bid ultra-high, win, delay XX days until the transaction auto-defaults, wait for it to expire, then try to catch it and make $$$. Where there is money to be made, there are always scams being run.
 
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I think reauction is the key. However, I do actually think that there may be a governing body or organization behind these kinds of things. If there is, then it will be easier to reclaim an auction house. But still, I think non-payment is bad. They just wasted their time and money to make the bid.
 
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@Joe Styler was kind enough to reply at TheDomains

    • Joe Styler says

    November 10, 2020 at 12:29 pm


    Thanks for this article. There are some good comments on here. It is something we are looking into.
    We do have fraud checks in place both manual and automated and that bid up scheme with two or three people bidding a name well above normal pricing in order to get the domain handed down to them as the “legitimate” buyer is an old scam that we have several ways to counteract.
    We do have a lot of other measures in place as well to combat bad bids. We have ways to vet buyers and bidders. At the end of the day most of the domains that are unpaid are unpaid because of a payment issue by a legitimate bidder. We have been testing out ways to help with this that have been working. We are looking now into a systematic way to expand this out so that we can extend the payment time on certain transactions which should further reduce the already low number of failed purchases on the platform.
 
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sensitive subject for many as sellers, and losing buyers. ty for bringing it up. :)
 
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