Have you ever looked into buying a domain on the private market? It’s a risky proposition, as private sales can be anywhere from a few hundred to tens of thousands of dollars. If you have proof the domain is currently in good standing, or even neutral standing, then buy away if the price is right. If the domain is a known spam site that’s been penalized in the past, you need to think long and hard before making a move. Sure, you can get it for a little cheaper and maybe clean it up with good Small Business SEO, but it’s likely not going to be worth your time.
When it comes to spammy domains, there are essentially two types of penalties: manual and algorithmic.
Algorithmic penalties are given to bad domains automatically when Google’s algorithm detects spam practices. To get this kind of penalty lifted, you need to clean up the site and get rid of all the low-quality backlinks pointing at it. Google’s algorithm will continually crawl the site and when it determines you’ve cleaned it up well enough, the penalty will automatically be lifted.
Manual penalties are given by actual humans and they are the more severe of the two. You have to clean up the domain in the same way as with algorithmic penalties (getting rid of bad backlinks) but you have to document every step you take. Once you’re confident the domain is clean, you submit a reconsideration request. Unfortunately, a lot of spammers will pretend to sell their domain and do a little cursory cleanup before submitting it for reconsideration. This means Google is incredibly strict about lifting a manual penalty, and you’re going to have to do a lot of work.
Matt Cutts explained that, in most cases, it’s just not worth your time to try and revitalize a domain that has been penalized for spam. Spammers will run sites with blackhat until they’re smoking holes in the ground, and as Matt says, “you don’t want to be the sucker who gets stuck with that bad domain name.”
This isn’t to say you can never buy a penalized domain, just make sure you do plenty of research before you drop some serious money on what’s the web equivalent of a superfund site.