How Virtual Real Estate is Similar to Traditional Real Estate

In addition to my work in domain investing, I sell houses for a living, so I know that people are often unrealistic when it comes to what they want for their home. I am not even sure they put the real value into the equation, but rather they come up with random thoughts like:

  • I paid “x” for it.
  • I owe “x” on it.
  • I need “x” to buy a new house.
  • It has sentimental value.
  • I am sure someone will see the value the way I do.

And in reality, only a few things matter such as location, usability, and condition.

Similarly, I see people attempting to sell domains that are just ridiculously overpriced and it shows that they simply don’t know the market. There are a handful of factors that make a domain valuable, and that it what you have to look at. These factors include, but are not limited to:

  • Exact match of commonly searched keywords – with short, common dictionary words being at the top of the list (i.e.
  • Revenue associated with the domain – which usually means it has a website associated with it.
  • Being “brandable” – and while this is a factor the difference between brandable and branded could be in the millions of dollars.

Appraisals Only Mean So Much

In traditional real estate, getting an appraisal means hiring an expert to look at the factors that make up the assumed value, but it does not guarantee that someone will pay a certain price.

Similarly, a domain appraisal is very subjective, even when it is based on the cost per click of commonly searched keywords and keyword phrases.

The bottom line is that people need to be realistic when pricing and know why they are asking what they are asking. I have had people drop prices pretty quickly after being asked pointed questions about the domain.