Advice on buying a domain that's already registered?

I am interested in purchasing a good domain name that is currently being offered at $7K. Can anyone provide me any guidance on how to negotiate these deals and things to consider, lookout for, in this process?

Here's some advice if you get into negotiating

The Art Of Negotiating A Domain Name Purchase

Okay, pay close attention. Here's where you finally get the real value
out of all the rambling I've just done. ;-) I'm about to save you a
small fortune and help you have a chance at buying domains you'd never
have a chance at. This is based on THOUSANDS of deals and a lot of
trial and error...

This is the step that 99% of people SCREW UP.

I see so much bad advice about how to approach someone to buy their
domain... "contact them and say I see you're not using xxxxx.com, I
have a little project I'd like to use it for... would you be willing
to let it go?" etc. etc. etc. HORRIBLE ADVICE.

People that are sitting on domain names don't keep paying the
registration fees every year for fun, even if they aren't using the
name. They know it has value. So don't insult their intelligence
making them think they should do you a favor by letting you have their
unused domain.

Many Domain Owners Think They're Sitting On A Lottery Ticket

Many domain owners think that one day someone is going to come along
and give them millions for their .Com no matter what it is. The fact
is, domains are only worth what someone is ready to had you a check
for. (A tip to all you wannabe speculators.) I've seen many GREAT
domains never get sold, so always keep that in mind. Anyway, because
domain owners have this thinking, they are very reluctant to NAME A
PRICE. So forcing them to start by naming a price isn't something they
want to do, because they're hoping YOU offer some ridiculously high
price that they will then counter to go much higher.

Because of this, you MUST start out on first contact with an offer
(more on this in a second). The approach of "would you be willing to
sell xxxxx.com? If so, how much?" isn't going to cut it; one of the
main reasons is that domain owners of decent domains get TONS of
emails all the time asking them that, and when they've replied in the
past with a price or try to start negotiations so many people are only
willing to pay $100 or some insulting price.

So what do most domain owners do? IGNORE YOU. That's right. So if
you've ever contacted a domain owner after looking them up with a
Whois search and they didn't reply, it's not because they didn't your
email (which makes you think that follow-up fax or phone call will do
the trick; HINT: it won't.) It's because they think you're like
everyone else that thinks they can buy the domain for $100 or so.

Here's how you get their attention and get the ball rolling...

Rule #1: You must start out by making an offer in your initial email.

Rule #2: This offer must be high enough to get their attention and
make them at least THINK.

NOTE: Rule #2's amount will depend on how great the domain is.

The two magic price points I have found that work the best (they
depend on how valuable the domain is) is either $1,000 or $2,500.

If it's a great domain then $5K-$10K is usually the starting point.
These amounts are enough to get anyone's attention. I've bought many
$100K+ value domains for $15K-$20K by starting with a $5K or $7K
offer.

By starting with at least something that gets their attention they
will take you seriously. This is the first step or you have no chance
to make a deal.

In most cases for decent 2 words domains, the $1K to $2.5K opener
works best.

• TIP: Always know your seller if possible. Do a Whois on who owns the domain, visit the domain in their email address or do some Google searches, etc. You'll often find a struggling Web designer is sitting on a great domain. $1,000 cash to that person is a lot of money. So this also goes into the process of deciding what to open the offer with.

The key here is not to insult someone with a lowball offer, but offer
enough to make them know you're a serious buyer.

So here's a sample initial contact email to send... (and I'll explain
the rest of the language I use)...

Subject Line: Whatever.com ($2,500?)

Hi,

I see you are the owner of Whatever.com. I'm in the process of trying
to find a domain name for a client I am building a web site for and
think your name could be a good fit. I am contacting different domain
owners as we have it in the budget to buy a cool name and Whatever.com
is on the list we came up with.

Would you be interested in selling it for $2,500?

Let me know and I can have the funds wired to you next day or PayPal'd
to you. Just let me know your PayPal address.

Thanks for your time.

-YOUR NAME

Let's breakdown why I used that language...

1. You've positioned yourself as not the future 'owner' of the domain. You're just managing a budget for a project. This helps because as they will usually counter with a higher amount, you'll play the "sorry, I just don't have it in the budget to go that high" to work towards a price you want. You'll also be able to play the "let me see if the client can approve a budget increase to accommodate that price" etc. etc. This also allows you to play Good Cop, Bad Cop in a way. You're just someone trying to get the deal done to do your job (build the site). You're also presenting yourself as someone LESS EMOTIONALLY INVESTED IN THE NAME -- which will potentially keep the price down. (Trust me, it works very well.)
2. You mention that you're contacting several domain owners (i.e. making multiple offers). You're playing up SCARCITY, one of the most powerful emotions when it comes to sales. For all this person knows they could reply and say "okay, I'll sell it" but you may come back and say, "sorry someone replied to our email first and now we have a domain."
3. By closing with the "we'll pay you right away" it makes the offer more REAL. Many of these domain owners get offers that people back out of and have no intention to actually pay. And you're also ASSUMING THE SALE by saying, "what's your PayPal address?" :-)

Again, all of these things are very, very powerful and I have tweaked
this initial contact email over the years.

ADDITIONAL TIPS

Let's say you initially offer $2,500 on a great name and the owner
counters with, "I couldn't sell it for that, I've had higher offers. I
would never sell it for anything less than $10K."

FIrst, you must IGNORE anything they say. You'll get the "I've turned
down higher offers" response a lot. In the example response about $10K
above, unless you would love to have it for $10K, just reply with
something like this... "While I do think your name is possibly worth
$10K to someone, we just don't have the budget for that much, sorry. I
could probably get something more like $5K-$7K approved, but even
that's pushing it. Anyway, thanks for your time."

That's it. Cut them off. Trust me, they'll come back to you 90% of the
time. Sometimes you just have to be a little PATIENT and you'll save a
fortune. Remember to always play up the SCARCITY. "That's just too
much for our budget... looks like we'll just go with an alternative
name that we've been negotiating for a lot less, even though we
preferred your name. Thanks for your time and at least trying to work
something out." That's NOT what they want to read from you. ;-)

There are THOUSANDS of amazing domain deals out there waiting to
happen. I, personally, buy domains all the time this way. In fact,
this is probably a good time to negotiate some deals as many people
need the cash more than in recent years.

FINAL TIP: It's not uncommon to settle on a final price that is 30% of
what their original asking price was. Keep that in mind as a general
rule of thumb. I've had many deals for great names where someone
"really wanted $60,000" and we closed the sale around $20K.

Check out this article on 10 tips for buying a domain. I would focus on 5-10 for your situation.

Definitely use an escrow service. I've used Escrow.com (backed by Fidelity) in the past and had a good experience.

I'll add the following advice from the eBook Buying Profitable Websites on Flippa :

Buying a keyword domain is tricky—you need to know three key pieces of information
to get one:

• How many people search for this exact term in a month?
• Where do they search? Is it in your country or others?
• How competitive is the term? Are there a lot of other sites trying to do this same thing?

If a search term has more than 12,000 searches for the exact term on local US searches,
and there isn’t much competition, it might be worth pursuing. But if the search volume
is particularly low, say 350, or the competition is very high, or most searches happen
somewhere you are unlikely to get sales for your product—this keyword isn’t very
valuable to you.

For these reasons, we recommend that you avoid buying domain-only auctions. There
are a few exceptions to this rule:

• If you own another product and you wish to claim your brand domain, you can file a lawsuit against the infringing party to get your brand name back, per ICANN rules. However, for this to apply, you must have a registered brand in the form of a trademark in order to proceed.
• If you wish to obtain a particular keyword domain, you can bid on it and if the interest is low in the overall auction, negotiate afterward if the seller’s expectations are too high. Being the only interested party in an auction does give you some leverage, since the seller will have few options.
• If the domain is something you want to use to start a business AND is reasonably priced for your budget, AND it is one of the top 3 TLDs (com/org/ net), then this auction might be worth buying.