What are things to look for before buying a PR domain? I know that verifying backlinks are #1, and making sure the domain hasn't been dropped is #2.... Correct me if I'm wrong.... I'm guessing that when domains are dropped they are de-indexed from search engines, and the backlinks start disappearing over time?
It is never a great idea to buy a domain solely for PR purposes. There are many things that can affect PR. I could invest a few bucks and buy some high PR links and on the next update have a descent PR. Then I sell the domain to you and you check everything and all the back links are there and the PR is legit. However, the links I bought expires or I cancel them and change to another URL and bam, you have no PR on the next update. This is just one case. There are many ways to boost PR for short periods. Buy only brandable domains that you can use and are of benefit to you for the name or an established website.
You can search many of the webmaster forums including here for link sales. You are looking for high PR on either site wide or homepage links. The links should be related to your niche and there should be as few outgoing links as possible on the site you purchase from. Make sure you research as much information as possible to make sure the site was not a recent dropped domain or it is a redirect which equals fake PR. If a site is a PR7 and has no traceable back links, it is fake. Check http://whois.sc to see how the site has been registered, do a search on Google for the site URL, and check PR on http://www.checkpagerank.net/index.php. If anything looks weird or the person does not seem reputable, it is better to avoid the deal. If it sounds too good to be true, it is!