Critical Steps to a Successful Acquisition
Buying a jet, or for that matter any airplane is more complicated than it seems, the details are numerous and failure to take all of the proper steps could result in a VERY expensive mistake.
Buying a jet, or for that matter any airplane, is more complicated than it seems. The details are numerous, and failure to take all of the proper steps could result in a VERY expensive mistake.
There is no “secret sauce” to what we do. It’s just a lot of hard work and attention to detail. The details usually make the difference between a purchase that the new owner is proud of and one that he wishes he had not made.
We do have access to information that most aircraft buyers do not have access to, and that makes our job easier, but the steps of buying the airplane are not a secret. I’ll gladly share with anyone considering buying an airplane the steps that are required for purchasing the particular aircraft they are considering. They are different for different types and models of aircraft, or I would just list them here.
To make a good decision we need two things: information and options. When buying a turboprop or jet aircraft, make sure that you have as much information about each potential aircraft as possible, and make sure you are considering all of the aircraft that meet your budget and mission criteria.
Once the right aircraft is chosen, be sure to execute each of the following steps:
1. Research – Do as much research as possible before making an offer on an aircraft and certainly before spending any money to travel or inspect the aircraft.
2A. Make an Offer – Once your market research is done and you’ve researched the subject aircraft, having determined that the airplane appears to be as represented, it’s time to make an offer. This in itself is an art and not one I can explain, so I’ll stick to the practical portion. It is very important to use a well written Letter of Intent (LOI) to make your initial offer. (Do not use a purchase agreement at this point and DO NOT use the seller’s documents). The LOI should contain the parameters of the deal you are proposing but avoid specifics about what and when until you’ve had the opportunity to inspect the aircraft.
2B. Place Your Deposit – As part of your offer, you will be expected to place a deposit towards the aircraft. The amount will vary depending on the value of the aircraft (typically $50k – $250k). Be very careful to only agree to a deposit that is within industry norms. Call me if you need guidance. The deposit should be fully refundable and should only be placed with YOUR title company. DO NOT send money directly to the seller!
3. Visual Inspection – Once your offer is accepted, it’s time to have someone who is an expert in the model of aircraft you are buying inspect the aircraft and its logbooks. This is not a pilot. This is a mechanic or aviation consultant.
4. Bore-scope Inspection – One of the critical steps of buying a turbine aircraft is to have the engine(s) inspected prior to relocating the aircraft to the inspection facility, engine repairs can be very expensive, and we want the seller to agree to the repairs before we invest any additional funds into the inspection. Use caution when bore-scoping an engine under warranty or on an engine program. The bore-scope inspection may void the warranty.
5. Test Flight – This should be a comprehensive flight of the aircraft checking all of the aircraft’s systems to verify they operate as required. This should be completed by a pilot, one who is rated in the aircraft and knows the type of aircraft and its systems very well.
6. Aircraft Purchase Agreement – Once the initial inspection is complete, it’s time to enter into a formal purchase agreement. The Aircraft Purchase Agreement is the MOST important step of purchasing an aircraft. It will determine that both parties meet their commitments to the other and it will determine the successful closing of the aircraft. Do not use the seller’s document unless you have it reviewed by an aviation attorney and be sure that your purchase agreement includes all federally mandated language.
7. Pre-purchase Inspection – Once the APA is executed, it’s time to move the aircraft to the inspection facility. The inspection we want is a “pre-purchase inspection,” not an annual, a phase, or an event, though it is common for the maintenance facility to sign off on a required inspection once the pre-purchase inspection is complete. A pre-purchase inspection is an inspection done to ensure that the aircraft has no evidence of damage history or undisclosed repairs and that it meets the standards expected by the purchaser. We typically want to go to a shop with a good reputation that specializes in the type of aircraft being purchased. We do not want to use the facility that has been maintaining the aircraft.
8. Closing / Title Company – Once the aircraft has passed inspection and the seller has met all of their commitments, we are ready to close. Closing MUST be done at an aviation title company, and yes, they are all in Oklahoma City, Oklahoma (that’s were the FAA is). If a seller ask you to close outside the title company, that typically indicates a major problem. You could end up involved in a criminal matter, potentially as serious as money laundering.
I hope this information helps. I consider every step listed above critical, but remember: each aircraft is unique and some steps may need to be added or skipped. For instance, an airplane with TAP or MSP probably does not need to be inspected via bore-scope, but in the case of an engine program, it is imperative to understand the terms of the program and to verify that it is fully paid prior to purchase. This was written for jet and turboprop aircraft but many of the same steps apply to piston aircraft.
SHARE THIS BLOG