The DomainPawnshop.com Platform (DPP) was designed to address the void in domain name liquidity. And while the platform does provide traditional listing capabilies for the buying, selling and/or leasing of domain names, it also facilitates the initiation and negotiation of a Purchase-Repurchase Agreement (PRA) between Owners and Investors.
At DomainPawnshop.com a PRA (also known as a sell/buy-back agreement) contemplates one party (Owner) selling an asset to another party (Investor) at one price at the start of the transaction, while committing to repurchase that asset from the second party at a different price on or before an agreed upon future date.
If the Owner defaults by failing to buy back the asset, the Investor (as the new Owner) may sell the asset to a third party to offset his loss. The asset, therefore, acts as a sort of collateral and mitigates the credit risk of the transaction.
While a PRA is structured as a purchase and repurchase, it behaves economically like a collateralized loan or secured deposit. The difference between the price paid by the Investor at the start of the purchase-repurchase agreement and the price he receives at the end is his return on the cash that he is effectively lending to the seller.
It is important to understand that while an Owner may agree to repurchase their asset, it is generally treated as an option to repurchase, wherein the Investor must assume that there may not be a repurchase of the asset (which in this context is a domain name).
This fact all but ensures a lower price will be paid for a domain name in a Purchase-Repurchase Agreement than might be paid for the domain name in an outright sale. This is similar to a pawnshop transaction where a pawnbroker has to get an asset at a low enough price that they can still make money selling it in their shop if the owner never returns to pick up the property.
At DomainPawnshop.com, submitting a Funding Request is the first step to creating a PRA. Once a request is received, it is included in the database for Investors to review. At that time, if an Investor is interested in funding the request, he or she may submit a proposal for the Owner’s review. The Owner may then take any of the following actions:
- Accept the proposal as-is;
- Reject the proposal;
- Make a counteroffer, or;
- Ignore the offer (and it will eventually expire)
If an Owner makes a counterproposal, the Investor may:
- Accept the counteroffer as-is;
- Reject the counteroffer;
- Make a new counteroffer, or;
- Ignore the counteroffer (and it will eventually expire)
This dialogue continues until one of the parties accepts the other party’s proposal or counteroffer – or the offer or counteroffer expires. In any of the above instances, the record of the parties’ dialogue is locked.
If an offer or counter offer is accepted, the contact information for each party is appended to the entire back-and-forth that occurred between the parties and is immediately available to both parties to print out for their records.
In conclusion, though the DPP documentation that is generated for users may represent sufficient basis for legal action, if the parties wish to further reduce their agreement to a written contract, then the DPP documentation should be taken to an attorney to create such formal document for signing – which is beyond the scope of the DPP’s capabilities.