How do I know if a domain I want to buy has been blacklisted?
 

Title says it all... :)

Go to google, type in "site:example.com". If results are displayed, it's not blacklisted. This doesn't mean it hasn't been penalized at all, just that it's not blacklisted.

If no results are displayed it doesn't necessarily mean the domain has been blacklisted.

how do you know if a domain is penalized?

And if results don't display? What if the domain is expired and not indexed currently? That could be reason too. Or never registered. So I guess there really is no way to truly tell...

why on earth do you think they would blacklist a domain that had never been registered?

check google webmaster tools.

If there's no results, it might be blacklisted, it might be a new domain, it might not be indexed yet... could be lots of reasons.

Does a site:domain.com dislpay results? How old is the domain?

I'm going to sound like an asshole right now, but how can you be in this biz and not be able to discover something so simple? Seriously, a simple google search will show you 10,000 tools to show you whether or not a domain has been blacklisted.