Paypal is so convenient and so many people use it, that it is very tempting to buy and sell websites using Paypal. Sellers have to be very careful when using Paypal to sell websites. Paypal does not support the sale of digital goods, and a website is a digital good that is downloaded after payment. All a dishonest buyer needs to do after the domain and site has been transferred is to file a Paypal dispute saying “Item not received” and often, Paypal will decide the dispute to the buyer’s advantage. That leaves you, the seller, without a website, domain and without the payment for your site. Occasionally, with enough documentation, Paypal will decide in the seller’s favor, but that’s not the norm and is very risky to rely on that happening.
What can you do to reduce the risk of using Paypal for selling websites? Since the issue with Paypal is digital goods vs physical goods, turn your website into a physical good. Get your buyer’s address and send the site to him via Certified Mail on CD. He has to sign for it and you have proof of delivery.
Another thing I’ve done for a larger sale is to put it in the listing that the domain will be held by me (pointing at the buyer’s nameservers) for 60 days if Paypal payment is used. If they dispute the transaction, just point the nameservers back to your own host and you haven’t lost your site or your domain. After 60 days, they cannot file a dispute in Paypal so it is safe then to transfer the domain to them.
One final thing that helps when you need to win a Paypal dispute over a website sale is to have a sale contract for the transaction. I use the one that Flippa sells and just fill in the details of the transaction. It’s not as good as one an attorney would draw up for you, but it’s good enough. I actually won a Paypal dispute where the buyer tried to say that they did not authorize the transaction and I escalated it to a claim and submitted all of my emails and pms plus the website contract to Paypal. That was enough proof for them to decide in my favor.
For large transactions, it is best to use an escrow service to handle the transaction. A couple of good ones that I’ve used are Escrow.com and Safefunds.com. Both will provide you with a much safer transaction, however, Safefunds.com does it a lot cheaper than Escrow.com. When using a escrow service, I always stipulate that buyer and seller with split the escrow fee. Both of us are being protected, so why should the seller take on all of the costs of that protection? Using Escrow.com’s premium service over their standard service literally doubles your fees for escrow.
Although I’ve taken a risk numerous times and accepted Paypal for transactions of around $2,500, I recommend against doing that. To be safe, use an escrow service for transactions of $1,000 or more. You can use it for smaller transactions too if you want to and with Safefunds cheaper fees, there’s really no reason not to.