To the pros, May I ask if someone will get into trouble if the site they already sold suddenly depreciated significantly in the possession of the new owner? For example, the listing states that the site is earning XXXX of income, but instead during the possession of the new owner, the revenue dropped to X or XX instead. Likewise for traffic or other aspects that add significant value to the initial price of the site. Legally, will the previous owner be responsible for this, since the new owner would most likely call for this as a scam and/or a refund? Just curious, thanks in advance.
Did the seller knowingly misrepresent the income of the site? Or did something change which was outside the seller's knowledge and control?
Does the latter matters legally? Should it be without a contract, would the seller be responsible for the site anymore after the sale?
I am not a lawyer but my understanding is that if you were completely honest as the seller, did not mis-represent the site earnings for a period of several weeks or months before the sale, and did nothing to cause the drop directly - then you'll be fine. This happens in business all the time - whether buying and selling websites, or buying and selling actual physical companies. The buyer buys a site/company based on its previous revenue and performance combined with its future earning potential. Future earnings can not be guaranteed to and it is up to the buyer to do his/her homework to find out if the site/company will continue to earn those kinds of earnings. Once the site/company is sold - so long as you didn't do anything to directly cause the drop and didn't mis-represent the sales revenue prior to the sale, you'll be fine.
Why did it happen would be the definitive line between who is accountable. If you mis-represented the earnings and activities of the site - that's your problem. If the new owner say banned bots with the robots.txt that would be their problem.
If you can prove you made the earnings previously (having screenshots, or access to your affiliate/adsense earnings, etc. will help!) , and it didn't drop off before you sold it, then there shouldn't be a problem. But don't take my advice for it. On a side note, if you did this trade across international lines, you would have further legal protections/remedies. If within the states completely, then as long as you didn't fraudulently misrepresent anything you're fine. And even if you did, you're probably fine too. Sadly, you should for morality's sake make amends, if you did deceive them. If not, you have nothing to worry about most likely, unless they resort to legal bullying for something that is their own mistake.
I have been flipping sites for over 2 years. Once I have come across such an issue and the problem was on their side. They aggressively promoted it buying links and all and google penalized it. But since I couldnt tarnish my image as an honest seller I just refunded them out of my own pocket. That's how it is in business.
Definitely matters. If you intentionally misrepresented what you were selling, then in almost any country the purchaser would have a good chance against you in court. This is true whether or not there was a contract, though if there had been a contract, you would have had the opportunity to protect yourself somewhat.
Thanks for all the useful advices. But from what I've known, I haven't came across anyone who has been sued or jailed in this site selling industry. Have you guys came across any?
There has been thousands and thousands of lawsuits for fraudulent misrepresentation. If someone loses enough money, you can certainly expect them to take legal action. Depending on the circumstances, the seller could also be charged with larceny - a criminal offense.
Most of the time on internet site seller use lot of things to bring traffic on his site But he don't share exactly how he is bringing traffic to his site with the prospective buyer.Later when new owner comes he is not able to make that much profit....
Yes I agree, but what I am more concern is about, what actions can lead to the seller facing legal charges? Pointless complaints or acts of defamation might not get your money back, so having a clear idea on how you would be protected legally is the best prevention scheme for you to make a huge loss.
If one of these is PPC... and the new owner doesn't use PPC - I'll buy that... but XXXX earnings down to XX or just X earning doesn't sound much the new owner not understanding a trade secret unless that trade secret was "lying through your teeth".... then it makes sense.
An signed off accounting audit by a legit CA and a copy of tax returns from IRS provides the evidence of factual revenue. Not filing a tax return is proof that the revenue didn't exist.