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Tips 2 - Use of Escrow in Aircraft Sales
By: Jerry Temple
As Published in The Twin Cessna Flyer 9/95
Other Publications this article appeared in: Cessna Owners Organization 12/95
I wrote about Logbook security last month in The Twin Cessna Flyer and the phone and fax went crazy with compliments. Thank you.
I began by saying that I am always hearing of an unfortunate, and often dumb, Logbook problem. I can honestly say, rarely do two days go by without being told of an unfortunate, and often dumb, deposit/title problem. Friends, use a Licensed and Insured Aviation Title/Escrow firm for your aircraft transactions. Always. It is the best security/protection you can easily acquire. There are many good firms. Several are in Oklahoma City, or have offices there, in order to work closely with the FAA. I use Aero-Space Reports. Owner Neil Snowden and Escrow Officer Kellie Price are efficient and their prices are quite fair.
Always send your good faith/earnest money deposit to escrow. The escrow officer will inform the Seller or the Seller's Broker of receipt of the deposit. Escrow will generally telephone, fax or email the Seller and the Seller's Broker. If you are a Seller, that call means there's money in place on your aircraft. If you are a Buyer, and the Seller, or especially the Seller's Agent/Broker will not accept a deposit going to escrow, forget them. Walk! Good bye! If a Seller or Seller's Agent/Broker wants the deposit, run, don't walk! A legitimate Broker will not be offended if you wish to use an escrow firm. Actually, it usually makes his getting paid easier.
The escrow firm will send both the Buyer and Seller an Escrow Agreement. The Agreement, or attachment (amendment) outlines the terms of the refund of the deposit. In other words, if it is 100% refundable, and if so, under what conditions, and if any part of the deposit is Not Refundable, under what conditions.
The escrow officer basically has three stacks on his/her desk. He/she must have an ink signed Bill of Sale from the Seller. The Bill of Sale as signed by the Seller, must be identical to the name the aircraft is titled to. NO CHANGES! Example: An aircraft registered to Jerry Temple. I would not sign J. A. Temple. Most sellers send a Bill of Sale, prepared by a knowledgeable Broker, to escrow by overnight courier. DO NOT MAIL! Sending your signed bills of sale to escrow is perfectly safe. That's our system. It's done hundreds of times daily. Escrow must have the signed Bill of Sale in order to pay the Seller. Escrow firms are insured for millions.
Escrow needs from the Buyer, you guessed it, money. It can be in the form of a cashier's check sent overnight or a wire transfer from a bank or lender. The grand total of the deposit and additional funds sent to escrow must, of course, equal the purchase price. If you are borrowing from a bank/lender, that source must he in possession of your signed loan agreement and have received evidence of insurance, naming the lender for coverage. The lender will not send escrow any money or authorize any money to be paid to the seller unless they have these two items. These are buyer's responsibilities.
After the Evaluation Flight and Pre-Purchase Inspection, if the Buyer elects to proceed with the sale, regardless of any further Seller concessions, the Buyer informs the lender and/or escrow to pay. Escrow wire transfers the required funds to the Seller's bank, may often pay the Seller's Broker and registers the airplane to the new Owner.
If there is any problem with the aircraft, i.e., Specifications, misrepresentations, the Evaluation Flight, Pre-Purchase Inspection, Logbooks, etc., escrow provides the Buyer, and the Seller, with a clear understanding and procedure to finalize or terminate the transaction. More on the Evaluation Flight, Pre-Purchase Inspection, Discrepancies and concessions in another issue.
Never send the Seller or Broker money. I am honest and trustworthy. Do not send me any money. Get it?