Yeah it can be a risky businesses ive been caught out a couple of times mainly because i got to excited and just payed for it with out good research first.
Tips i would add to the post would be
- Take your time in deciding to buy
- Make sure you really have time for the domain ( one of my weak points)
- Check the correct stats i.e Dropped Domain, Fake PR, Age and Backlinks
If you get everything right you can get some real gems, you can find most of the info you need at places like
Smart PageRank - check & monitor PR, these tools might be usless to most but it gives you a good base.
For example it gives you the domain age, Alexa rank , backlinks, and a direct link to the internet archieve (domain history is always a good thing)
Other sites that are a must is
Fake PageRank Detection SEO Tool and PR Check - SEO Logs.com
Which will quickly tell you if the PR is fake.
Remember that if you are checking weather the PR is fake and the site tells you something like "This domain is showing PR5 but we cant find the google cache to confirm" this doesn't mean that the PR is 100% fake, it could just me the domain has been banned by google, its then up to you weather you want to take the risk and buy it anyway, if you choose to buy it get a new site hosted on there,log onto google webmaster tools and request reinclusion stating that you have just brought the domain, i haven't had a reinclusion request turned down yet.
Also a sure sign the domain has been dropped is that it will show as a new domain in age section, sometime's if the domain has been dropped the backlinks do not always disappear so be careful on how you choose what to buy