For the domain buying newbie, understanding how domain sales work takes some research. The economy has rendered home sales static, yet domain sales continue to rise. But, predicting domain prices is not quite as predictable as home sales. Many premium domain sellers resemble the one guy in the neighborhood who refuses to lower his price no matter what his real estate agent recommends.

Their Common Ground

Homes are priced according to recent sales for similar homes in the neighborhood. When home sales rise, you can price your home higher and the reverse is true when sales drop. This is not too difficult to understand as the home market fluctuates much like other markets in any given economy.

To determine a fair bidding price for a domain, you can research recent domain sales for similar domain names. DNSales.com is one such site where you can type in the main keywords contained in the domain you are interested in buying and see what related domains have sold for. Sellers who are concerned with moving their domains quickly will accept offers in these ranges.

Where They Differ

Think of the guy in the neighborhood who spent more money on his house than anyone else. He added a Jacuzzi tub, the granite kitchen with all the bells and whistles, a sauna, a home theater, and Italian marble bathrooms. The rest of the neighborhood homes have either porcelain or linoleum tile kitchen floors, rooms that need updating or older windows. No doubt, he takes pride in having the best home on his block, but his agent insists he needs to come down $75k on his price. He won’t budge.

When you think about home sales trends, you would expect sooner or later this guy will have to come to his senses if he’s really serious about selling his home. But, like many premium domain owners, maybe he’s not in any rush. He’s willing to hold out until he gets his price.

In the domain sales industry, there are so many spontaneous purchases. A lot of shoppers scoop up a great domain name right away, either because of its potential value in the future or because it is precisely the domain name he/she wants to use for business purposes.

This spontaneity benefits the stubborn domain seller. Like the stubborn home owner, he is just waiting for someone to come along and fall in love with his domain. His buyer is like the stubborn home owner’s buyer who just has to have that house. He doesn’t care about the neighborhood. He just loves what the home has to offer.

And this is where domain sales get unpredictable. Recent sales may indicate a price range far below what the domain seller sells the domain for. In a nut shell, a domain is worth what someone will pay for it today.

So, if you are transitioning from real estate investments to domain investments, there is a learning curve. You might think a domain could never sell for the price the owner is asking, but the domain owner might eventually find someone who will. Spontaneous buying is impulsive and devoid of long term reasoning. If you’ve watched great domain names come and go, standing your ground on the price, you’ll have to prepare yourself for the erratic results.

Theresa Happe works with BuyDomains.com, a premier source to discover domain names in every price range, from the unregistered domain to premium domains.