Buying premium domain names for a particular business purpose involves at least two parties, a number of decisions, and a sequence of events.

Party number 1 – the Seller: First, there is the registrant/owner, or seller, of the domain name in question. He or she, at some earlier point in time, acquired the domain name most likely because it represented a good value or prudent investment opportunity.

This registrant/owner might be a group, an individual, or a company. Whatever the initial rationale for acquiring the domain, he or she did so with a longer range vision in mind … be it to develop the domain name into a revenue generating website, to lease it, to park it, or to resell it for a profit later on.

This registrant owner has already performed their own internal valuation of the domain name and typically has a “for sale” range in mind. The bottom of that range is the lowest price the owner would ever take. The top of that range is the best case scenario in which the domain name is simply perfect for a particular end user’s purpose and will command a premium price. Then there is the middle range which represents to the seller an acceptable profit, but perhaps lower than their best case scenario.

Party number 2 – the Buyer: Second in the buy a domain name formula is the buyer. The potential buyer is someone who has taken notice of the domain for sale and identified it as valuable for some purpose of their own. They too have a specific value assessment formula through which the domain name has been passed.

The buyer operates with a similar “price structure” in mind which represents the least amount he believes he could reasonably pay to acquire the domain, the highest price he would pay to obtain it, and then a general middle ground price that would represent a “good buy” or “fair deal”.

Potential Party number 3 – the Broker: Sometimes working in between the seller and buyer is a domain name broker. This person may actually represent either the buyer or the seller, or be positioned more as a neutral facilitator like you might find in an online brokerage like Sedo. The broker may be highly involved in the domain negotiation, or alternatively, have little to do with actual negotiations and merely oversee the transfer of funds and domain name ownership.

An active broker who has been shopping a domain on a commission arrangement will have a vested interest in the domain name property. So much so that the broker’s opinions and expectations may come into play as a third influence behind that of the buyer and seller.

Buying domain names is more art than science, and is dependent on the mix of many variables that exist between the seller and buyer. The more specific and well-defined the buyer’s need, the more easily he will be able to narrow down his domain name choices to a select few that meet his criteria and expectations.

If the seller has seriously considered their own price range comfort, then he or she will be better able to communicate with a potential buyer on the feasibility of negotiating a mutually acceptable price .

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Sinking a hole-in-one is the aspiration of most premium domain name owners. Whether through successful site development or an eventual domain buyout, a substantial return-on-investment (ROI) is the minimum expectation.

There is a confluence of factors that feed into the dynamics of a “domain name for sale”. First is the individual’s motivation for selling. This can vary greatly from person to person and is often a private consideration that may or may not be disclosed to a potential buyer. Seller personality traits, personal financial situation, domaining experience, and portfolio size are also potentially relevant factors that play into the overall equation.

As a seller, your most important starting point is a proper valuation of the internet property you are considering selling. As is documented on this site, premium domain valuation can be somewhat complex. When an exact price/value cannot be comfortably defined, then a value range will suffice in the marketplace. Ultimately, to effect the sale, you as seller must arrive at a final price you can live with.

A true premium domain has the potential to reach very high plateaus of success depending on who acquires the domain and to what extent the property is developed and branded into a major asset. The question for most domainers is “Just how premium is my domain name?”.

From a personal point of view, I have seen domain owners both overvalue and undervalue their domain properties by a significant margin. Domain name forums are full of for sale postings that read “premium domain for sale”. When in reality, the domain is nowhere close to premium. Conversely, I have seen domainers sell their high quality domain asset well below it’s true value … which usually ends in seller’s remorse. Once a domain is gone, it’s gone.

In dealing with a prospective buyer, a seller is well-advised to consider that the buyer may not have much knowledge of the domain industry. Some general education and discussion may be necessary to help the buyer appreciate how the premium domain will create company recognition, attract customers, and act as a brand and business asset which will appreciate over time. The domain, if premium, will function as a top class portal (and business driver) that can elevate the buyer’s company above the competition.

If the buyer cannot envision the potential enhancement to their company, then they may back away or try to negotiate the price downward. You, as seller, may be faced with the option of agreeing to sell for less, or simply thanking the buyer for their interest and moving on.

Sometimes the buyer’s offer lands in the bottom of your price range. And to sell may make sense given your needs at that time. If the buyer’s offer is close (but too low), then creative thinking can sometimes move the deal forward. There are agreements in which the seller has accepted a less than stellar cash offer, but retained 5% ownership in the domain (including future gross earnings) for a period of 5 or 10 years. Such compromises require very clear contract language such that any ambiguity is removed, and both parties are crystal clear on any contingencies or recourse for problems should they arise.

Another option, if working with a motivated buyer, is to assist with financing of the domain purchase (either by referral, or by actually accepting a down payment yourself and working out a monthly payment schedule with a defined buyout date). Still yet, another avenue is to lease the domain to the buyer (via a tight contract) that allows optional buyout of the premium domain, or provides the leaser first right of refusal should you receive a great purchase offer during the lease period.

To close, premium domain investing is an investment vehicle with monetization options & numerous exit points along the path of ownership. Premium domain names sell themselves eventually as businesses look to maximize their opportunities via the incredible growth of the internet. The pool of potential buyers is often national (if not global), and far larger than the relatively small domain name investment community itself.

Consequently, sellers should not only examine their sales/development time horizon, but also consider the size of the potential market for the premium domain, and to what extent that pool of buyers are aware of the premium domain name and its likely benefit to their company. As with rare art (or any industry-specific business), you don’t just sell them to anyone. A good fit is required. Premium domains are sold to a custom clientele who appreciate their value, and who can appropriately utilize the asset.

• Readers may also enjoy: Domain Name Negotiation

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Deciding to buy or sell a domain name is a process. Many sellers provide a price tag as a general expectation of what they aim to receive for a domain. A “Buy It Now” (BIN) is a firm price like you might find shopping in a retail store. BIN prices make the purchasing process fairly quick & easy as negotiation is typically subtracted out of the process.

Alternatively, some sellers may adopt a pure negotiation format in which they don’t commit to an up front domain sale price. If a serious buyer interest is expressed, then the seller may quote a general range they are looking to sell in. The buyer may then reciprocate with an offer as a starting point for negotiation.

Sellers of premium domains usually prefer to keep their options open, and are commited to not underselling a potentially high dollar internet property. Domain values vary with economic cycles and industry trends, and may go through periods of rapid appreciation depending on many market variables. For this reason, commiting to a finite price in time doesn’t serve the seller’s long-term interest. There are many examples of domain names which were thought to be over-valued. And to the surprise of many, the domain name was sold at a premium to the right end-user buyer. Why? Because the domain was of very high quality and had few, if any, comparable alternatives.

Domain name price setting and negotiation style are a frequent subject of debate within domainer circles. It is accurate to say there is no single correct way to work through a negotiation. Premium domains will have an automatic, intrinsic worth of which both buyer and seller are aware. Sometimes the buyer’s need for the premium domain is not sufficient to meet the seller’s asking price. The buyer will either walk away for a cheaper alternative, or suspend negotiations such that both parties can think it over. So, an impasse in a domain negotiation may not be a dead deal, but a temporary “time out” which allows both parties to reassess their positions. Further negotiation may occur at a later date. This is always a good leave-the-door-open policy.

For this reason, it is important to keep emotion out of the negotiations. Patience, professionalism, and good diplomacy are excellent tools for keeping a negotiation alive. “Tactics” often backfire, and work only on naive or uneducated buyers/sellers. As a buyer and seller of domain names, I have dealt with a variety of personality types and negotiation styles. Listed below are several automatic buyer dont’s that will not only kill a deal, but may ruin any chance of future negotiations.

Buyer Don’ts

• Don’t make an initial low ball offer, and then aggressively debate the seller in an attempt to lower the seller’s price expectation. In most cases, you will be immediately perceived as a cheapskate and/or time waster. To establish yourself as a credible buyer, you should acknowledge the seller’s property has significant worth. Why else would you be calling if you didn’t want the domain in the first place? A lowball offer says “I want this, but I hope you are stupid enough to give it away cheap”.
• Don’t make an offer you aren’t prepared to fulfill. The seller may accept your offer, but you will lose all good will when you start tip-toe’ing around the fact you don’t have the funds to close the deal.
• Don’t make unreasonable demands or complicate the deal unnecessarily. Simplicity and clarity are always better for the deal. Prune expectations and steps down to as few as possible. That way the deal is about the domain … and the price, and not much else. Terms and conditions will certainly be a subject of discussion. But those can be specified (negotiated) in the purchase agreement and worked through amicably once an agreed upon sale price is reached.

Buyer Do’s

• Do listen, and approach the discussion with an open mind. The seller has his/her unique perspective (and reasoning) for being in a particular price range. Very often, buyers have not considered all of the important elements in a domain valuation. After reflecting on a seller’s perspective and input, a buyer may come to understand new things about the domain property that justify the premium pricing. Failure to listen will break down the communication.
• Do look for common ground. You, as buyer, obviously have something in common with the seller. The domain in question appealed to you both … due to the meaning contained in the words that comprise the domain. Yes, negotiations can be touchy and tenuous. But, they can be worked through to a successful conclusion. Both buyer and seller understand that the domain presents some benefit that is either already established, or that may be (as of yet) an unrealized potential.
• Do make an attention-getting initial offer. Owners of premium domains didn’t acquire them by accident. Most domainers that I know are well-educated, shrewd, and financially comfortable. They may not need to part with their premium property. Coming in low says absolutely nothing. Coming in with a substantial offer sets the proper tone and atmosphere for doing business.

Good luck, and have a great day!

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