Domain Flipping And Speculating - Part 4: Due Diligence

OK - straight into it. This installment deals with an important issue to be considered when buying domains on Forums (again using DigitalPoint and NamePros as examples) - that of Due Diligence (or Buyer Beware).

Due Diligence:

As with any transaction, it pays to carry out whatever checks you can to ensure that you’re not getting screwed. When purchasing a domain from the Forums the following checks will be useful in helping you decide whether or not to go ahead with that purchase.

Common sense also applies here - you may not bother making all of these checks if you’re paying $2 for a domain, but you will want to be extra sure if you’re forking over a couple of hundred bucks.

None of these checks are in themselves foolproof, but they will help to re-assure you that the seller is genuine.

Seller is an established Forum member: This isn’t to say that a new member can’t be trusted (hey, we all start as Peon’s sometime), but it’s a fact that most people feel more comfortable buying off someone who has a bit of history and more than a handful of posts to their name. This is why I recommended (way back in Part 1) that you get yourself registered at DP and NamePros and start participating in the non-sales forums.
Seller’s Rep: Pretty simple - if they’ve got red marks or a bad rep, this should sound some warning bells.
Seller’s Trader score: Trader points are a good indication of a member’s behaviour in previous transactions. By clicking on their Trader rating/score you will be able to see all positive and negative comments left by others who have dealt with this person before.
Whois: Don’t just blindly accept that the seller owns the domain or that they have posted the correct details. There are hundreds of standalone ‘Whois’ type tools out there (plus on most of the major Registrar’s home pages) - so there’s really no excuse for you not to spend a few seconds of your time by checking that the domain registrar/expiry/owner details tally with what’s being offered. You might even want to send an email to the domain’s administrative email contact address and get the seller to reply to that email (but don’t expect to be popular if you do this for very low-end sales - you’ll just seem like a pain in the butt).
PR & Traffic confirmation: If the seller claims some kind of existing PR or traffic for the domain, you could ask for screenshots of stats or parking figures as proof. The general rule of thumb is that if you claim traffic/revenue you have to be prepared to provide proof. As with whois, use your PR checker of choice to verify any claimed PR.
Trademark: You might want to verify that you’re not being lumbered with a potential legal problem - names that look to be trademark infringments or ‘dodgy’ typo’s for example.
Registrar: Check that the registrar that holds the domain allows a free push between accounts (and that you can set up an account with them if you don’t have one). There are a number of registrars who still don’t allow a free ‘push’ and even make the transfer process awkward - you might have to bear this in mind when it comes to the actual cost of your purchase.
Too Good To Be True: If it looks too good to be true, it almost certainly is. Which probably means that the seller doesn’t even own the domain or that they have stolen it (yes, that is possible). There are always genuine bargains to be had, but looking around on the various Forums will give you a good idea of what a domain might be expected to go for - so if someone is selling pizza.com for $100 you know that they’re either incredibly stupid or a crook.

(Also - bear in mind that any sensible seller wil be looking at you, as a potential buyer, in the same light and checking history, trader etc).

Assuming that you’ve satisfied yourself (as far as is reasonable) that the seller is genuine then you’ll probably want to proceed with your bid/offer.

Types of Sale

Now, there are all types of sales threads of course, but the bulk of sales that you come across on the forums will fall into one of three main categories:

Fixed Price
Make An Offer
Auction

You will also find (mainly on DP) sales threads that are nothing more than links to a SEDO listing or a SitePoint auction for the domain. Unless it’s a domain you REALLY want I would tend to steer clear of those.

Part 5 will be along in a couple of days (I had plenty of time to think during my enforced layoff) and will cover the three major types of sale, then the mechanics of buying/selling and transferring your domain…

Thanks
Dave