Domain Buyer Guide
If you want to buy a premium domain name (one worth US$25,000 or more), our advice will help you conclude the deal. Business associates of ours once owned the valuable domain names 96.com, 97.com and 98.com and found it frustrating that so many buyers found it difficult to negotiate correctly.
Understand 'whois' records. One of our other sites SimpleWebHostingGuide.com discusses whois records from perspective of owner of the site, but that is still useful discussion about whois records in general. The whois records give you some contact information for 'Registrant'. Most of the time this is the owner of the domain. Exceptions are where the domain is held indirectly (e.g. through a trust, holding company, legal firm). If you contact them, they may forward the contact to the real owner - you just have to see how it goes.
Many people don't even bother to do this (something likely to mark you out as a complete amateur buyer immediately). Open the site in a Web browser and see what is there. There are a number of outcomes:
If the site is parked in some way or otherwise has no original content, this means the seller has not bothered to develop the site. This is often a good indication that they would sell the high-value domain given a reasonable price. A site that has some content may still be up for sale - in which case your first check is via "Alexa Rank" to see how much traffic the site already gets.
For high-value domains, we think you should
avoid using a third-party like a domain broker. Rather deal with the
seller (owner) direct.
If the site is parked and you click the "This site may be for sale. Please contact...." link, you usually end up involving the parking company as a broker. Their margins (commissions) may not be transparent - and are often unnecessary. That said, domains put up to auction through domain brokers/auctioneers are sometimes the only way you can get a chance to buy the domain name you want. After all, the seller wants the best price possible - and an auction may be the best way of achieving that. If you bid at auction, determine commission charges up front and ask specifically about reserve prices.
The real estate (property) market is very broad,
efficient and objective. The market for valuable domain names is not
really like that. It is more like the market for fine art i.e. is
more cyclical, subjective and narrow. The seller's dream is to find
a 'I must have that domain name' buyer. This happens usually where
the buyer is looking to build a good long-term business (brand)
using a premium domain name that is underused at this time. If that
is your intent, by all means mention it to the seller. On the plus
side, you get instant credibility with the seller. On the minus
side, the seller may immediately think you are prepared to pay top
dollar. On balance, you might want to keep it vague - something like
"We are a private business looking to invest in high-quality domain
names - including possibly developing Web sites ourselves".
The intrinsic value of a domain name depends partly upon the price and availability of alternatives. For example, if you are negotiating with a seller for the florida.com domain name, then both you and the seller can think about alternatives such as myflorida.com, florida.us, floridavacation.net etc. The seller will obviously downplay the value of lesser alternatives. We don't think you should over-emphasize the value of alternatives when talking to the seller. We would go so far as to say you might not mention them at all, particularly if the broad market shows the alternatives are really not a factor e.g. you are negotiating for a distinctive .com domain and the only real alternative is a .net domain likely to worth only 10%-20% of the .com domain.
An additional approach to valuation is to look at the income stream (if any) the domain name currently generates. If you offer $25,000 for a domain currently generating $1,000 per month for the owner, they are going to do the math in the same way you would. Most parked domains earn nothing like $1,000 per month. The average is more like $10-$50 per month. But you should factor current income in. If in doubt, ask the seller what income they currently get from the domain. The cost of holding a domain name is not significant - typically around $10-$30 per annum.
All the above factors will still not get you to a definitive valuation of a premium domain name. There is no such thing. But they are factors the seller will be thinking about - so you need to think about them as well.
You might care to have a look at What is a Domain Name Worth? for another view on domain name values. You could also try sites like Estibot for a rough domain name valuation.
The sale is concluded with change of registrant (the
owner changes from the seller to you the buyer) and often with
change of registrar (the company who manages the registration of the
domain). Both changes should be complete before the seller receives
the money. The only really safe way to achieve this is to use a 3rd
party to hold the funds while the changes of registrant/registrar
take place. There are plenty of 3rd-party escrow companies who can
do this process for you. Pick one that is well established and not
necessarily the least expensive. Call up their help line to see how
helpful and informed they are. Their fees tend to be quite
reasonable for high-value domain name purchases. We mostly use escrow.com
for such domain sales. Telling the seller you will pay the 3rd-party
fees can be a nice sweetener to a deal. Note that funds paid out to
the seller may incur a payment fee of $30-$50. Make sure the seller
understands that cost will be deducted from the amount they receive.
We suggest you never take verbal or email discussions as a definitive offer to buy/sell. If you panic the seller "But you already agreed in email. You must honor the deal otherwise I sue.", they can just disappear the domain temporarily elsewhere. Make it clear right up front - in initial contact with seller - that you would propose to use a 3rd-party escrow company to seal the deal and that discussions prior to that you expect to be taken seriously but do not view as legally binding. That way, you are far more likely to get relaxed negotiations and a seller who does not feel you are trying to trick them.
Understand that the owner of a valuable domain name
will get *lots* of unsolicited enquiries about the domain. Often
these are blunt one-line emails "Do you want to sell ?. How much ?"
using free email addresses like Yahoo, Hotmail and Gmail.
Try to reply politely to every one. The best advice is never to use a
temporary email address to try to disguise who you are. This is
pointless if you have to reveal yourself anyway at the final stage
when you try to conclude the deal. If you genuinely want to be
anonymous, negotiate through a lawyer or someone else you trust.
If the seller thinks you are a serious buyer but being a bit discreet for some reason, the first thing they are going to do is have a little dig on the Internet to find out more about you. There is no point in hiding something that an Internet-savvy person can find out in ten minutes using a search engine like Baidu or Google.
People often say things in email that they would
never say in direct negotiations (face-to-face or over the
telephone). Be careful with email. It is very easy to write
something that causes genuine offense.
When you approach the seller, offer to talk to them personally over the phone if that is more convenient for them. Beware of time zone differences - do not give them a 'friendly' unsolicited telephone call at 3AM their time.
Be cautious about language differences - some domain name sellers can cope with email in their non-primary language but would hesitate to speak over the phone in that language. If language is proving a big problem, offer to accept contact from them in their primary language and pay to get it professionally translated. There are tons of translation companies on the Web that can offer you less than 1 day turnaround of short communications. Use PDF attachments of translations rather than body of email to avoid basic communications failures and misunderstanding.
Very simple advice in any negotiating situation. Some
sellers own a portfolio with hundreds or thousands of domain names.
These full-time domain traders may be much more aware of market
price levels than a seller with only a few domain names. They simply
think about domain prices differently. There may also be widely
different motives for selling - some sellers may have bought a
domain at quite a high price and simply want a modest profit or just
want their money back. Other sellers may have a firm view on the
profit they expect on a domain name they bought quite cheaply. Some
people are distressed sellers interested in a quick deal, others are
prepared to sit on their domains for the long-term.
In short, reasons for selling - and the price sellers put on their domain names - vary widely. The seller will frequently tell you the factors behind their domain price thinking if you ask politely. Try that - it can't do any harm.
It is often better if you start by asking the seller for a price range rather than a specific price. You may end up with a wide negotiating range, but at least you know roughly what the seller is expecting. Sellers are often uncomfortable quoting one specific price up front. When it comes to premium domain names, that is just the nature of the market.
Be patient. If the first round of negotiations
doesn't work out, leave the contact amicable. You may be closer to a
deal than you think. The seller may come back to you in a few
weeks/months to reopen negotiations.
You don't reach a deal first time. You send one of the final emails below. It is obvious which one is more likely to result in the seller getting back in touch with you at a later date.
The price you ask is way too high. You are never going to get it. Dealing with you was a waste of time. No further contact.
Price level still too high for me, I am afraid. Of course you may get the price you want from another buyer. I wish you good luck with that. Thank you for making the time to talk to me anyway. By all means contact me if you would like to reopen negotiations.
The final rule. Do not negotiate abrasively. Owners of valuable domain names may not get 'serious' offers very often. They may only refine their position as negotiations with you progress. Give them time to think and express their thinking. Don't set arbitrary deadlines in stone. Always be polite - particularly in emails.
There are many reasons why negotiations for the
purchase of a premium domain name may break down along the way.
Disagreement on price is the only good reason for these negotiations
to fail. You want to avoid every other reason.
Premium domain names; valuable domain names; quality domain names.