Pitfalls to avoid when buying a website

By | November 8, 2007

When entering into any transaction you need to be very careful, even more so when you are buying a website. There are several things to watch out for and a little bit of work can save you many headaches later. Here are our tips:

  • Do your due diligence. In simple terms it means “Do your homework!”. Verify as much as reasonably possible about the website you are buying. Verify traffic information and cross-check them with third party information such as Alexa.
  • Find out information about the seller and make sure that he/she owns the website and domain they are selling. Run simple background checks on the seller. You can use an outside service or use some of the free tools available on the Net – including something as basic as Google to look up his/her name.

  • Don’t pay any money until you have done your due diligence. Consider using a letter of intent while you do your due diligence.
  • Make sure that the sale includes everything relating to the website and to any business component “attached” to the site i.e. business name, licenses, copyrights, trademarks.
  • If the website has any software make sure that the license allows it to be transferred to you. This also sometimes applies to other content such as images.
  • Make sure that the seller owns and transfers the rights to the code for the website. This includes design and layout code as well as custom software and script code. Sometimes developers of the code retain the rights to the code so be sure to check this 0ut..
  • Even after you do your initial due diligence consider making an initial deposit and holding back some of the money until after the domain is transferred and any other remaining aspects of the transaction are completed.
  • Buyers and sellers might consider using an escrow service like escrow.com – which currently handles domain name transfers.
  • It is always a great idea to consult with your attorney and to your accountant about the transaction.
  • If a deal sounds too good to be true it probably is, but don’t let that stop you from doing detailed due diligence to find really good deals.
  • Don’t be pressured to hurry to do a deal. If after doing your homework you get the feeling that something is not right, trust your gut and walk away. There are still going to be thousands of other websites you can purchase.

    As the saying goes …. buyer beware.