When buying a domain name intended for development, you should determine the “burndown value” of the domain name. In the general sense, the “burndown value” is what the name is be worth once the previously developed website was/is removed. Although a developed website generally increases the burndown value, there are some instances where the burndown value may be affected by the website that existed before, or what the previous owner did with the domain name.
The burndown value of a domain name is usually much greater than the burndown value of a piece of property. With physical property, you need to remove the remains of the former structure, pay for an inspection, and re-groom it for a new building. With a domain name, you simply change the DNS and you are ready to re-build. While this may seem simple enough, the owner should do research to determine the burndown value. Many times the value can be enhanced because the previous owner had a popular website or unique content that was indexed. However, there are times when this isn’t the case.
When purchasing a domain name at auction, it may be difficult to know the provenance of a domain name, especially if there are potential reasons it the burndown value could be negatively impacted. Did the owner have a child pornography site before? Did the previous owner use the domain name to send spam emails? Is the name banned by Google? All of these things are important things to keep in mind when purchasing a domain name.
Using a tool like Archive.org, you can see what type of website previously existed. You can also use DomainTools to see if it was blacklisted due to spam that was sent from the domain name. Generally, the burndown value of a domain name is greater than when it wasn’t developed, especially since values continue to rise. It’s important to fully research the history of a domain name before you buy it to avoid any surprises before you develop.