I believe this also: any domain name lookup service is actually a domain squatting service. When you look up a domain they buy it, then sell it to you for a markup.
If you look up the domain using their system and it doesn't exist, the person running the system could come in and buy it out from under you, and then offer to sell it back to you at a higher price. tbc I'm not accusing anyone of doing this, but that's the failure mode people are afraid of.
I spend way too much on domains I think are valuable, can't possibly afford to buy up every domain other people think are valuable as well. Big guys might though, I've always heard rumblings of this, never seen a real example though.