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Tips 6 - True Lies
BY: Jerry Temple
Regardless of when you consider the boom era of general aviation to have begun, or ended, general aviation is far different from both the 60's era and the boom years of, shall we say, 1975 to 1980.
One significant change that I have observed are the changes associated with purchasing a general aviation aircraft from a private party Seller, and this lends itself to questions a private party seller must consider regarding selling their aircraft. I will address at another time some hard questions you perhaps should ask yourself before putting your aircraft on the market.
Before discussing some of the problems Buyers can have with private party Sellers, I will just briefly state, as I have previously written, that there is an epidemic of "bad guy" Dealers/Brokers. I am somewhat embarrassed. I feel bad, but it is not my fault. Just be careful and use your head. Always use escrow for every cent! Deal with a professional and, as I can personally attest, the problems that I have had, and you too can have, with the so called honest private party "good guy" Seller, are both aggravating and costly. Trust me, take my word, Buyers can have just as many problems with less than honest, or less than knowledgeable private party Sellers.
For clarity, let us take a moment and somewhat define a private party Seller. For this discussion, a private party Seller is simply not an aircraft dealer who inventories and brokers aircraft, or a traditional aircraft Broker. The private party Seller can simply be an individual, a partnership or a corporation. How someone registered their aircraft is really irrelevant to this discussion. They're simply not in the aircraft sales business.
It is only fair to state that there are honest and professional aviation Dealers and Brokers. These are knowledgeable, educated and legitimate aviation business persons. Some inventory aircraft, some inventory and Broker aircraft and some strictly represent Buyers and Sellers or both. And like downtown skyscrapers, business jets, apartment complexes and other high ticket items, it is rare that a skilled professional Broker has not orchestrated the transaction. Please be assured, the general public does consider a $125,000, six passenger Cessna to be a high ticket item. This just is not a used Camaro in the Sunday paper.
The professional aircraft Dealer and Broker naturally has the common sense reason of desired repeat business and works to make certain that a satisfied and happy buyer is produced.
This brings up a category of Seller that has probably always existed, but due to low supply is very active at present. We will call this type of Owner/Seller the "dabbler". The dabbler likes to try to purchase approximately two to four aircraft a year, maybe conduct a repair or two, perhaps use the aircraft personally and then sell. Okay, you say, where's the beef? Just remember, Mr. Buyer, that this type of Seller has ZERO motivation for your repeat business, your referrals and by the very nature of the objective, will generally conduct the absolute minimum in quantity and quality of maintenance. This dabbler will usually have minimum knowledge of the aircraft and in most cases, it is just a "hobby". The problem calls I get from upset Buyers are often associated with purchases form these type of Owners/Sellers. Just try to get a dabbler to go to bat for you if you have got any type of a problem.
And now to the private party some desire to purchase from. You probably would be shocked, flabbergasted, and just shake your head in disbelief at the way a great number of fairly expensive general aviation aircraft are purchased. Let us just use a Cessna 3l0Q for example.
Often the aircraft is purchased for cash, without Title or damage searches, without Pre- Purchase Evaluation Flights and without Pre-Purchase Inspections. It goes something like this. A Buyer, we will call him Steve, sees old Doc Smith pull his 1972 310Q out of the Tee Hangar every couple of weeks. They wave and exchange a few words. Steve feels that Doc takes good care of his 310Q and, after all, Ernie, the established airport mechanic has conducted the maintenance. One day, Steve learns the 310Q might be for sale. Doc Smith confirms that the aircraft is for sale, quotes a price and goes on to tell Steve how great the aircraft has been, how much he has enjoyed it and what a great mechanic Ernie is.
Steve knows there will be several interested Buyers and commits to the aircraft. He writes Doc Smith a deposit check. A few days later he presents a cashier's check for the balance. Doc Smith signs a Bill of Sale. Done deal.
Fiction you think. I wish. The calls come in a few weeks or months later. Was anybody dishonest? No. Lacking knowledge? Yes. Ignorant? Perhaps.
As if you could not see all of Steve's errors, please bare in mind that Doc Smith may have purchased the aircraft in a similar manner five years earlier.
Steve actually wanted to fly the aircraft and thought about a Pre-Purchase Inspection but it is a small airport and he did not want to "insult" Doc Smith, nor Ernie, who he might need to work on his new 310Q.
As it turns out there was a mechanic's lien on the aircraft from the owner prior to Doc Smith, and the FAA still shows a Security Agreement (lien) against Doc Smith from a small bank. Doc Smith says he long ago paid off that loan, but the bank never submitted a lien release to the FAA and that bank has since been taken over by a larger bank. And, that bank was recently sold to a large national bank. This is common.
Steve now takes the 310 to a shop for an Annual Inspection or decides that he wants a professional appraisal conducted for either a possible loan or just to make sure his estate knows the true value of his new 310Q. (That is smart!) Regardless if it is the shop's AI reviewing the Logs, or an experienced aircraft appraiser, a whole bunch of bad news is uncovered. Missing Logbook entries, missing STC and 337 documents, poor entries, numerous regulatory questions, etc. And, hangar neighbor Doc Smith knew nothing of any of this. He bought this aircraft from a friend of a friend who took good care of it, etc. Get the picture?
Again you might just be shocked with how little many Owners know about their aircraft. I often ask Owners some pretty basic questions about their High-Performance Singles or Twins. I routinely hear answers like: "I guess so, probably, don't they all", etc. I daily speak with Owners from various occupations that have never read the aircraft's Logbooks at a super slow speed. And, they fly these machines in night IFR.
The professional responsible for selling an aircraft must become prepared to address most reasonable questions. The professional knows that the assumption must be that the caller is an ATP/A&P, and be prepared. This is one of the areas that today surprises many private party Sellers. There is more to selling a $125,000 machine than just calling in a small ad. Obtaining top dollar is a difficult task. Owners mistakenly believe their "gem" will sell itself. The labor and marketing investment surprises many Sellers.
Another problem Buyer's often have with the private party seller is the Seller's lack of commitment to the sale. Some private part Sellers are merely testing the market with their ad and many do not want to sell their aircraft until they have located a replacement. This is no small glitch. Do you want to just go on hold while the Owner of the aircraft you are ready to purchase goes searching for a replacement. Do you want to put money in escrow with no guarantee the Seller will ever locate a suitable replacement? Do you want the aircraft to continue to be flown? What if you learn of another possible aircraft for you? What if the Seller locates an aircraft, but its sale and delivery has several complex contingencies. The point is that it can get real messy.
When you are working through an aircraft sales professional, the for sale aircraft is either owned by a selling Dealer, or is listed under a brokerage contract with the Owner. Yes the Owner can cancel such an agreement, but it can be costly.
This cost generally limits those Sellers just wanting to test the market. And, Brokerage Agreements usually clearly outline that if Offers to Purchase are received, and presented to the Seller, and accepted, then "Seller's Remorse", a case of cold feet, can cost a Seller a total commission in addition to damages due to the Buyer. It is an eye opening and wallet opening surprise to many Sellers that believe that just because they own an aircraft, they can just do as they please with a "sorry about that" attitude to the Buyer and Broker.
And a word about costs. The idea that a purchase from a Dealer or Broker will cost more is just not reality. Professionals are paid a fee by Sellers that recognize the enormous time and effort that go into the sale of a high ticket item and especially when a strong price is desired. An airplane has a true market value. It will be sold at that amount. A private party will not sell for less. Why should he? And, if that Owner believes that he has better things to do with his days, nights and weekends, or more profitable ways to spend his time, he will gladly pay a professional a fee deducted from the aircraft's market value. Get it? Think farms, shopping centers, office buildings, jets, and very expensive (to most people) general aviation aircraft.
So as you the Buyer go through the aircraft for sale ads, establish the same set of buying rules for a private party Seller as you may have for an aircraft Dealer or Broker. All three have honest and dishonest types. All three can have extremely knowledgeable persons and those that know dangerously little about the aircraft.
Remember Steve? He is in shock. He is sort of embarrassed, but he does not mind calling Jerry Temple to tell his story. Steve is a well respected businessman. He makes tough major decisions every day. And he recently bought his sixteen year old son an '88 Mustang. The car was purchased from an auto dealership. Steve's father, a pretty good auto mechanic, first looked it over. They drove the car around the block a couple of times. All is okay. The kid is happy. Steve weekly writes the shop, or someone, checks for work on his 310Q. His attorney is working on addressing some of the 310Q's problems.
Oh, I forgot to mention Allen. Allen is a professional Aircraft Broker/Consultant that Steve called and tried to "pick Allen's brain". Allen offered his services to Steve, but Steve was confident he could handle the complete acquisition of the 310Q. Allen was not upset in as much as he had just gotten another new client. Old Doc Smith after learning of all the problems that actually existed with his "previous 310Q", retained Allen to conduct a formal acquisition program for a 421C. And so, everyone lived happily ever after, except Steve.