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Bidder Due Diligence - 10 Steps On How To Avoid Getting Scammed

Discussion in 'Site Flipping' started by bryanon, Feb 13, 2010.

  1. bryanon

    bryanon Executive VIP Premium Member

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    Hey all,

    Since I strongly supported the opening of this section, I felt the need to contribute something to it and help it get growing.

    You can expect some howto's on site flipping itself in the very near future, but at first I wanted to give Flippa sellers some tips on how to avoid having to deal with scammers - as it's becoming a HUGE problem over there (as everybody who has sold more than a few sites over there recently can confirm).

    To get started - the very first thing to do is NEVER enable the "Accept all bids" option, even when you're off to bed for the next 8 hours or out of town for a day. Having this option enabled is a surefire way to attract loads of illegit bids, as bidders are informed about the fact that their bids gets automatically accepted BEFORE they place their bid.

    That said, here's my personal checklist that I go through, each and every time I get a new bid (this applies to bids that are in excess of $500 - with smaller auctions, I tend to go with a more relaxed approach as time is money):

    1. Open up the bidder's account information page and check the general information, such as a) what's the age of their account; b) how much feedback do they have; c) if they've been actively bidding on other auctions.

    2. If the bidder has some feedback, I take a closer look at what's written, as well as check the profiles of those who have left the feedback to make sure that they're legitimate accounts (click on the "View feedback history for [username]" button).

    3. (Optional) In case of high amounts ($1,000+), combined with some doubt, i.e. the bidder has only a few pieces of feedback, I sometimes go the extra mile to actually PM the people who have left them feedback, asking if everything actually did go as planned. This is an important step, because more often than not, feedback is left right after the completion of a sale, and it can't be easily edited in the future, even if the buyer files a PayPal dispute a month later!

    4. In case everything checks out, the account is at least a few months old and there's some positive feedback, I go ahead and accept the bid.

    5. In case there are doubts (very new account, some negative feedback, etc.) I tend to ASK FOR A DEPOSIT (a small sum, usually between 5% and 10% of the bid, maximum $100) before accepting the bid. It's pretty simple really - I just tell the bidder to deposit a small amount via PayPal to guarantee their bid. Of course, I thoroughly explain the need for this and pay the money back promptly after the auction ends or after they've been outbid.

    Just in case some are wondering - I've had a chat with Flippa's staff about this and they have told me that they're fine with this - however (and that is important) in case you require deposits, you need to make sure that both your site's traffic details and revenue details are 100% correct and proven by screenshots! Also, Flippa obviously reserves the right to close down your account permanently in case you fail to return any of the deposits within 48 hours of the end of the auction.

    NB! SPEND A LOT OF TIME PREPARING YOUR DEPOSIT REQUEST PM! I can't stress this enough - most buyers on Flippa are complete newbies and can't even think of any scamming possibilities, meaning that unless you make things very clear, YOU will be the one suspected in a scam attempt.

    Also, it's most certainly not a good idea to ask for deposits if your own account doesn't already have extensive history and a nice amount of feedback.

    6. If the bidder refuses to pay the deposit then I ask if they have any alternative options to prove their legitimacy and if they don't then tough luck. Sure, you'll lose a bid or two every now and then but considering the amount of time (and money) it takes to relist an auction (as well as the fact that it will show as a relisting and, talking from experience, relistings tend to sell FAR worse than original listings, it makes sense to sacrifice a few bids.

    7. Once the deposit is paid, I approve the bid instantly and also check the "Approve all bids from this bidder" option to allow him to continue bidding without the need for further manual approval.

    Some additional tips:

    * DO NOT trust Flippa's ranking system. Flippa gives enormously high ranking boosts for very simple things, such as connecting an established Facebook and Linkedin account (while the account details are only visible to Flippa themselves), allowing scammers to acquire a trust rank of +12 with minimal effort.

    * Don't pay any attention to the country the bidder displays. Flippa's phone verification is extremely primitive, and it's very easy to specify US as your country even if you verify your account using a Lebanese phone number, for instance.

    * Nowadays, I always add the following paragraph in the beginning of all my listings:

    Happy selling and let's keep our arses safe!
     
    • Thanks Thanks x 29
  2. meathead1234

    meathead1234 Moderator Staff Member Moderator Premium Member

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    Nice one Bryan, this section is beginning to get off to a good start!

    All very good points, we've all made the mistake of getting overly excited and accepting a BIN without checking the bidder out - you'll soon learn quickly. Or, just read Bryan's post and you won't have that problem to deal with :)
     
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  3. ``Yousef

    ``Yousef Power Member

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    Wow, some very interesting information. I flipped a couple of sites last week, luckily it all went well, however I only wish that I'd had some idea of the scamming that goes on beforehand.

    Just a quick question, if I plan to sell off a few sites worth $10k and upwards, what kind of protection should I look to employ?

    I usually accept PayPal as payment (BIN automatic payment), however I'm aware that charge-backs can be a real bitch with PayPal.

    Should I seek out other payment methods for flipping sites with such value?
     
  4. meathead1234

    meathead1234 Moderator Staff Member Moderator Premium Member

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    Use Escrow for anything that is viable cost wise (over $500).

    Don't go anywhere near Paypal at the levels you are talking - it is fine sometimes, but all it takes is one sour deal to lock your account and lose $xxxx

    And on top of using Escrow have a contract drawn up and perhaps sign a NCA and NDA with the buyer.

     
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  5. bryanon

    bryanon Executive VIP Premium Member

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    Absolutely correct.

    The only thing I would add is that even if you choose to accept only Escrow for the payment, you will STILL need to be extremely careful on who you accept bids from, as the majority of the scams that are popular nowadays are based on the bidder never intending to complete the purchase (effectively making you spend a TON of time and money on relisting), rather than cheating the site itself off of you.

    By the way - I still accept PayPal for transactions for payments up to $2k in some cases, but whenever the sum is over $500 I need to be absolutely sure that I'm dealing with a legitimate buyer, they need to have flawless history and I always, always use the invoicing feature (so that I can make sure that the payment is for 'goods' rather than for 'services') and send the buyer a CD containing the website's files via UPS to have a tracking reference in case of a "non-receipt" chargeback.
     
  6. jamesss

    jamesss Regular Member

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    now i know how to bump my Flippa rank
     
  7. meathead1234

    meathead1234 Moderator Staff Member Moderator Premium Member

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    Bumping this thread as I think it is a great read for people asking questions in some other threads :)
     
  8. thestrangefruit

    thestrangefruit Regular Member

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    Very nice, we should probably get a few stickies in this section?
     
  9. BillyRayValentine

    BillyRayValentine Regular Member

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    Do you have a list of due diligence to complete if you are a buyer on flippa?
     
  10. mamboo

    mamboo Junior Member

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    Thanks bryanon, very interesting and informative post. I have already scammed by winning bidder who never paid, but that was on Sitepoint before flippa launched.
    Regarding point number 3, about Pming the people who left them feedback, I can't find any way to know who left the PM so how can I PM them?

    Is there any way to know who actually left the Feedback?

     
  11. meathead1234

    meathead1234 Moderator Staff Member Moderator Premium Member

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    You used to be able to (when this post was made), but you can't anymore.

    What you can do is find the URL they sold, do a WHOIS lookup and email the new owner. Even if they have WHOIS privacy, you can email them and it will get forwarded to them.

    Or you can just use the contact form on the site (if it has one) to get in touch.

    HTH.
     
  12. mukeshgbg

    mukeshgbg Junior Member

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    Its Great to read all these steps Bryanon.
    I have studied Flippa for more than a year and what i got from Flippa you just wrote it here.
     
  13. Quantum SEO

    Quantum SEO Newbie

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  14. Quantum SEO

    Quantum SEO Newbie

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    What are the time consuming questions that you people keep asking you when selling your website ?

    Would it be convenient to make a webpage, where I can send the client so he can verified the information and have access to the answers of the questions he might ask ?


    Tks once more spent several hours since yesterday on your section,
    Amazing Tks + rep added:china:

    I also have another question, just above this post... If you did already answer to these question elsewhere,
    just give me the link, and I wont bother you with my noobish question.
     
  15. netmaster

    netmaster BANNED BANNED

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    wow !! just got what i am looking ..thanks
     
  16. orzyman

    orzyman Senior Member

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    now that is from the big guy's mouth
     
  17. karmeghan

    karmeghan Newbie

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    Hey,
    Many thanks for the post, I am a complete newbie to flippa, but i didn't understand the last bit of "fill the information " part, Isn't it a general policy of most buyers? if yes how can we recognise the scammers?
    I guess its a total nooby question, sorry abt that, but hey need to know;).
    Thanks in advance
    Regards:D
     
  18. suntzu

    suntzu Newbie

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    thanks for the heads up with good advice. much appreciated. :)
     
  19. poweronics

    poweronics Jr. VIP Jr. VIP Premium Member

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    Thats a very informative post for all using Flippa. Keep it up.
    Thanks.