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You need to be careful when purchasing a dropped domain that appears to be too good (short name, no hyphens, competitive keyword phrase) a) take a look at what the site used to be in archive.org (the wayback machine) and take a look at if anything shady was going on b) if you are buying it as a regular domain and not paying a premium price, set up a dummy site and get it indexed then see if it ranks for it's domain name and also using the site command site:domainname.com. If it's not ranking it's penalized, if it's not getting indexed it's banned. c) If a site has been hit by Google it's done, at least until someone unwinds the penalty. Just dropping it and picking it up doesn't change the fact that it was penalized, otherwise everyone would be doing that to get out of penalties. So just be aware of that if planning on buying a premium domain so you don't get burnt. If links are pointing to a expired domain it's like they are 404'ing but once the site goes live again those links are passing PR to that site.