If you plan to buy a valuable Internet domain name (typically one worth US $25,000 or more) there are rules that work to your advantage. Some are more obvious than others.
Rule 1: Know who the owner (seller) is
This involves understanding ‘WHOIS’ records. 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.
Rule 2: Browse the site
It is amazing the number of people who don’t 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. The content will give you a good guide as to whether the domain is for sale. If you don’t know what you are looking at (e.g. how to determine if the site is ‘parked’), get some advice.
Rule 3: Negotiate direct
For high-value domains, I personally think you should avoid using a third-party like a domain broker. Rather deal with the seller (owner) direct. The seller will often welcome sincere direct approaches.
Rule 4: Understand domain name valuations
The market for valuable domain names is like the market for fine art i.e. is cyclical, subjective and narrow. The seller hopes to find a buyer who can build a good long-term business (brand) using the domain. The seller will always consider the price 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, florida.net etc.
An additional approach to valuation is to look at the income stream – if any – the domain name currently generates. You can also try sites on the Internet (such as estibot.com) that attempt to value domain names. But all these factors will still not get you to a definitive valuation of a 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.
Rule 5: Understand how the deal will be concluded
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 that manages the registration of the domain). Both changes should be complete before the seller receives the money. For high-value domain names, this typically involves the use of a 3rd-party escrow company. Pick one that is well-established and not necessarily the least expensive. Their fees tend to be very reasonable for high-value domain name purchases.
I suggest you never take verbal or email agreements as 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 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.
Rule 6: Do not hide who you are
Understand that the owner of a valuable domain name will get *lots* of unsolicited inquiries about the domain. Often these are blunt one-line emails “Do you want to sell ?. How much ?” using public email addresses like Yahoo, Hotmail and Gmail. Avoid that style of communication. If you genuinely want to be anonymous, negotiate through a lawyer or someone else you trust. Either way, make the time to do a proper business introduction up front. Otherwise the seller views your contact as just another waste of time.
Rule 7: Make it personal
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.
Rule 8: Understand what drives the seller
Very simple advice in any negotiating situation. Some sellers own a portfolio with hundreds or thousands of domain names, other sellers may only own a few domain names. There may 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.
Rule 9: Establish a price range
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 a single specific price up front. When it comes to valuable domain names, that is just the nature of the market.
Rule 10: Never close the door
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.
Rule 11: Be reasonable and polite
The final and most important 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.