Buying a domain can be a daunting idea.  The fact that you are sending money to someone with no assurance that you will receive anything in return can be a scary idea.  There are several things you can do as a buyer to ensure a successful transaction.

The first thing you want to do is try to verify the identity of the seller.  This is important to ensure that they are indeed the rightful owner of the domain.

Next is determining how to receive payment.  There are many ways to get paid for your domain including cash, money order, check, wire transfer, or online payment services.  It is strongly recommended that if you choose an online service you use one that is friendly to domain buyers.   At this time the service that is safest for buyers is PayPal.  PayPal has policies in place that strongly favor the buyer of a domain name.  If possible you should use this service for buying your domain name.  There are other services that are safe to use, but lean towards the seller.  MoneyBookers is service that is becoming more and more popular with domain name sales due to it’s stronger fraud prevention.  NOTE:  if you are selling a domain you should avoid using PayPal as it offers little protection to domain sellers.

The safest way for both parties is to use Escrow for the transaction.  Escrow functions as a middle man, holding the funds until both parties verify that the transaction has completed successfully.  The buyer sends the money to the escrow service who holds the money.  The seller then transfers the domain and when the escrow service verifies that the domain has been transferred they release the funds to the seller.  MoneyBookers has an escrow service that is very affordable, charging only 1% for the transaction.  Additionally they charge the buyer 2% up front as a deposit to ensure his swift actions in completing the transaction.  Once the transaction is complete the 2% is refunded.

Escrow.com is a commonly known escrow service that provides the same function as MoneyBookers.  However Escrow.com charges a higher fee and does not guarantee against chargebacks.

Prior to sending any payment you should find out what registrar the domain is registered with. The easiest way to transfer the domain is to have an account at that registrar.  Most registrars allow free transfers of domains to another account with their service.  If feasible you should open an account at the registrar that the domain is registered with to ensure the faster transfer of the name.  If not possible you will have to initiate a transfer between registrars and this is a time consuming and sometimes cumbersome process.

Once you have sent the money you should contact the seller with a copy of the receipt and ask them to initiate the transfer to your account.  If using a transfer between registrars you will have to ask them for the authorization code for the domain and initiate the transfer through your registrar.  Ask the seller for copies of all communications between the seller and the registrar for your records.

It is recommended that you keep copies of all emails regarding the sale of a domain in the event that there is a dispute over ownership of the domain.

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