Every domain investor should do some due diligence when purchasing a domain name. Generally, this entails a Whois lookup at a site like DomainTools, and it should also involve a Whois History search. If something looks funky in the Whois records, there may be reason to investigate further.
One of the best ways to do due diligence on important domain names is to contact the previous owner. You can easily find out his or her information in the Whois History too. You’ll want to let the person know that you’re calling to do due diligence and you just want to confirm that he or she did in fact sell the domain name to the current owner.
If you really want to pry, you can even ask the price, but most people will find this question inappropriate. You also may not want to know how much more you are spending than when the domain name was previously sold.
Like purchasing art, a domain name’s provenance is important to know. Generally, a domain name will not become more valuable because a particular person or company owned it, but you should know that all previous transfers were legitimate.
Elliot – 100% you are right about due diligence
BUT I disagree about a domain’s provenance not affecting it’s value. I think that if one of the “legendary” domainers has owned a particular name it significantly increases that domain’s value and liquidity. Simply put – It validates the domain as something desirable.
The same can be said about drop auctions – if you see a handle of someone you know to be a successful domainer, then you know that you are bidding on a domain which is desirable and presumably has value.
@ Andrew
If I was buying a name that had been owned by Frank S, my first question would be why did he sell it for less than I am willing to pay, assuming the owner was selling at a profit.
@ Elliot
Your problem is in your assumption that everyone sells for a profit!
Many people who bought great domains in 2005 – 2007 are now dropping their shorts and taking a serious haircut to try and recover some of their investment.
I’ve been regularly buying domains for 25% – 50% of what I see a reported sale for only 2 – 5 years prior.
One good example is a domain I just bought: GreenAmethyst.com
This domain previously sold for $27,000
I bought it for a fraction of that.
Another example is VisitSaoPaulo.com – Oops, I didn’t buy that one yet! 😉
JOKING!!! I couldn’t help myself
Agree with Andrew’s points. But for newbs reading this thread, this needs to be said…
Seeing vaxis or benfranklin in a Namejet auction is a good sign, but doesn’t mean the sky’s the limit. There’s plenty of times when they don’t budge off the initial $69 @ NJ. Presumably because the big boys will bulk bid then whittle down what really looks good based on price.
Fwiw.