Pre-buy and offer protocol

[Van Johnston]

Once youve found a plane you would like to buy, what's the proper protocol?

Get the pre-buy inspection done and then make your offer and negotiate price?

Or, make an offer and negotiate price contingent on results of the pre-buy inspection?

Previous advice I got was to do the pre-buy first, so I have never brought up price or made a formal offer. But the sellers I have been talking to keep dragging their feet; it's been 5 weeks since test flight and logbook review and I stated my desire to proceed to the pre-buy. On the other hand, maybe they think I am stringing them along without a formal offer.

Any experience/advice out there?

 

[Fearless Tower]

I have seen it both ways.....pre-buy first and then the offer and offer-first then pre-buy.

Generally, if there is a broker involved, they will typically want you to make an offer and agree on a purchase price first submit a deposit to show intent and then you will do the pre-buy. Once the pre-buy is done, you will either have the seller fix the discreps and stick with the original agreed upon price, re-negotiate the price and accept the aircraft as-is( ie you fix the discreps), or you walk-away.

If you aren't working with a broker, then it is up to you and the seller to decide how you want to proceed.

 

[wabower]

Offer sheet first. Include detailed list of price, terms and conditions. Only after deal is firmly in place with signed agreement in hand should you spend a dime on pre-buy.

Once youve found a plane you would like to buy, what's the proper protocol?

Get the pre-buy inspection done and then make your offer and negotiate price?

Or, make an offer and negotiate price contingent on results of the pre-buy inspection?

Previous advice I got was to do the pre-buy first, so I have never brought up price or made a formal offer. But the sellers I have been talking to keep dragging their feet; it's been 5 weeks since test flight and logbook review and I stated my desire to proceed to the pre-buy. On the other hand, maybe they think I am stringing them along without a formal offer.

Any experience/advice out there?

 

[Tom-D]

Once youve found a plane you would like to buy, what's the proper protocol?

Get the pre-buy inspection done and then make your offer and negotiate price?

Or, make an offer and negotiate price contingent on results of the pre-buy inspection?

Previous advice I got was to do the pre-buy first, so I have never brought up price or made a formal offer. But the sellers I have been talking to keep dragging their feet; it's been 5 weeks since test flight and logbook review and I stated my desire to proceed to the pre-buy. On the other hand, maybe they think I am stringing them along without a formal offer.

Any experience/advice out there?

It really depends upon what you and the seller can agree on.

Do you have the history CD from OKC ?
Did you do a lien search?
Have you seen an AD compliance list ?
Have you seen all the 5 required airworthiness paper work to be carried in the aircraft?
Do you have a escrow company agreeable to both of you?
Do you know for a fact the seller is the legal owner of the aircraft or has legal authority to sell the aircraft and sign the bill of sale?

 

[wabower]

None of which means squat at the beginning. Everything on that list is a detail that will be addressed once the deal is made.

It really depends upon what you and the seller can agree on.

Do you have the history CD from OKC ?
Did you do a lien search?
Have you seen an AD compliance list ?
Have you seen all the 5 required airworthiness paper work to be carried in the aircraft?
Do you have a escrow company agreeable to both of you?
Do you know for a fact the seller is the legal owner of the aircraft or has legal authority to sell the aircraft and sign the bill of sale?

 

[Tom-D]

None of which means squat at the beginning. Everything on that list is a detail that will be addressed once the deal is made.

Why would you make a deal with a seller that does not have proper authority to sell the aircraft.?

Why would you even consider any aircraft with out a clear title.?

 

[wabower]

Who cares how it's titled? The agreement will specify that all those issues will be handled at closing, and it's the seller's responsibility to do it.

Why would you make a deal with a seller that does not have proper authority to sell the aircraft.?

Why would you even consider any aircraft with out a clear title.?

Because fewer than 10% of planes offered for sale are free and clear. Most are encumbered by lenders and title will only be cleared by the payoff from sale. Again, just another detail that is handled by the title company and part of the expected process.

 

[Tom-D]

Who cares how it's titled?


Because fewer than 10% of planes offered for sale are free and clear. Most are encumbered by lenders and title will only be cleared by the payoff from sale. Again, just another detail that is handled by the title company and part of the expected process.

I guess we deal in two different markets, The only thing I can't unscrew is a messed up title or a lien, they both can cost over the value of the aircraft, I simply find that and walk. I don't want my money tied up for the period that it requires or to pay fees for the inspections travel all to simply find a lien, or bad seller.

 

[flyingron]

All important things before you CLOSE THE DEAL, but an offer is generally made to hook the cellar and all these contingencies: clean title, inspections, etc... are done after the seller is bound up.

Why blow several thousand inspections and searches on a deal the seller could just walk away from?

 

[wabower]

If anybody came to me with that problem, I would suggest that they are missing a lot of potential opportunities for the wrong reason. If you do it right, those problems are eliminated on day one. Buyer escrows a deposit, the seller escrows documents. If the documents don't match the most current and updated records at FAA, the title company will blow the whistle.

I guess we deal in two different markets, The only thing I can't unscrew is a messed up title or a lien, they both can cost over the value of the aircraft, I simply find that and walk. I don't want my money tied up for the period that it requires or to pay fees for the inspections travel all to simply find a lien, or bad seller.

 

[N747JB]

Offer sheet first. Include detailed list of price, terms and conditions. Only after deal is firmly in place with signed agreement in hand should you spend a dime on pre-buy.

That is pretty much the way I have done it as buyer and seller. What difference does a pre-buy make if you are $$$$ apart on price? I am assuming we are talking about an airplane that is in annual and currently flying, not a project or something that has been sitting for 5 years.
As a seller, I would never let someone start a pre-buy without a signed contract and money in escrow.
As a buyer, I would never spend money on a pre-buy withour a signed contract and money in escrow.
Too many variables to overome without having a basic agreement in writing. It doesn't have to be a 15,000 word lawyers dream, just a simple one page of what is expected and what the price is, subject to inspection and who handles the squawks.

 

[Fearless Tower]

As a seller, I would never let someone start a pre-buy without a signed contract and money in escrow.
As a buyer, I would never spend money on a pre-buy withour a signed contract and money in escrow.

The only problem with that I have found as a buyer, is that there is usually an escrow fee that the buyer is going to suck up if the pre-buy determines that the airplane was misrepresented.

I ran into this problem on the T-6 that I did a pre-buy on 6 months ago. Seller was using a broker. Airplane advertised as 'not a show-piece, but solid flyer with rock solid maintenance'. I made an offer, wrote a check for the deposit to escrow and we did the pre-buy. Once we opened it up for the pre-buy, we determined that the airplane was a pencil-whipped basket case. Essentially a maintenance nightmare that I wanted no part of. I was able to back out of the deal, but the escrow company demanded their fee (around $500 IIRC) which I had to forfeit.

I've done a few airplane deals, but that was my first with a broker/escrow involved and it did not leave a very positive taste in my mouth for dealing with 'aviation professionals'.

I'd probably still recommned using a broker/escrow if you are looking at a high value airplane (cabin class twin, turbo prop, jet...etc), but for the typical GA airplane today, I think a savvy buyer who does their own due diligence can do a better job without the middle man.

 

[wabower]

Buyer and seller split escrow costs. Escrow is a benefit to both. Language should be included in the agreement.

The only problem with that I have found as a buyer, is that there is usually an escrow fee that the buyer is going to suck up if the pre-buy determines that the airplane was misrepresented.

I ran into this problem on the T-6 that I did a pre-buy on 6 months ago. Seller was using a broker. Airplane advertised as 'not a show-piece, but solid flyer with rock solid maintenance'. I made an offer, wrote a check for the deposit to escrow and we did the pre-buy. Once we opened it up for the pre-buy, we determined that the airplane was a pencil-whipped basket case. Essentially a maintenance nightmare that I wanted no part of. I was able to back out of the deal, but the escrow company demanded their fee (around $500 IIRC) which I had to forfeit.

I've done a few airplane deals, but that was my first with a broker/escrow involved and it did not leave a very positive taste in my mouth for dealing with 'aviation professionals'.

I'd probably still recommned using a broker/escrow if you are looking at a high value airplane (cabin class twin, turbo prop, jet...etc), but for the typical GA airplane today, I think a savvy buyer who does their own due diligence can do a better job without the middle man.

 

[Fearless Tower]

Buyer and seller split escrow costs. Escrow is a benefit to both. Language should be included in the agreement.

Sounds like I got screwed.

But I have since heard that I wasn't the only person to have been screwed by that particular broker. At least I didn't have the cops arrest me with a 'stolen' aircraft.

Bottom line is that (as with anything), you have to do your research and that includes researching the Broker's history.

 

[NineThreeKilo]

Negotiate a ballpark price first, based on the verbal/photo condition

Order CDs for the FAA (registration, 337s, etc)
http://aircraft.faa.gov/e.gov/nd/

Set up pre-buy with non-owner affiliated A&P, I've worked deals where the guy doing the pre-buy was also a IA, so we re-upped the annual at the same time if condition was OK.

 

[Van Johnston]

Thanks for all the feedback. This is a 4 seat GA aircraft I found out about from a flyer on the bulletin board at the fbo where I rent and they get it annualed. No broker involved. I do have the CD. The sellers have owned the plane in a corporation for over two decades. The names of the guys I am talking to match the purchasers names on the bill of sale and the names for the corporation officers on file with the state. There are two known discrepancies going into the pre-buy they have already agreed to fix. The a&p I have lined up has not seen this plane before, and owns his own plane of the same make.

I plan to call them tomorrow to get the discussion started on price and T&Cs.

 

[NineThreeKilo]

Thanks for all the feedback. This is a 4 seat GA aircraft I found out about from a flyer on the bulletin board at the fbo where I rent and they get it annualed. No broker involved. I do have the CD. The sellers have owned the plane in a corporation for over two decades. The names of the guys I am talking to match the purchasers names on the bill of sale and the names for the corporation officers on file with the state. There are two known discrepancies going into the pre-buy they have already agreed to fix. The a&p I have lined up has not seen this plane before, and owns his own plane of the same make.

I plan to call them tomorrow to get the discussion started on price and T&Cs.

Sounds like you're on the right path, AOPA also has template purchase agreements you might want to check out.

 

[Ted]

I wouldn't let someone conduct a pre-buy prior to knowing what they would expect to pay for the plane if it checked out as advertised.

What Wayne said. I want to know what their offer is, with the understanding that there will be a pre-buy and certain issues may result in a renegotiation.

Of course, if I get the "Hello sir, I am very glad to hear that your NINETEENSIXTYNINE PIPERAZTECD is still for sale. I am satisfied with the condition and..." then I'll hit "Spam."

 

[flyingron]

There's no need to escrow documents (except perhaps the bill of sale at closing). You make an offer (with a deposit to be held in escrow) contingent on what you are worried about: prebuy or whatever inspection you deem necessary, title search and lien release, etc... This makes the buyer feel happy because he has a buyer whose committed enough to not only place a deposit but to do all this research. THe buyer is happy because he knows that if all goes well he has the plane, but if it turns out the thing is a unairworthy or there are old liens that haven't been cleared, he can get back out.

 

[flyingcheesehead]

That is pretty much the way I have done it as buyer and seller. What difference does a pre-buy make if you are $$$$ apart on price?

Bingo. Pre-buys are expensive. Haggling on price is free. (Except for the price of the plane, of course. )

The only problem with that I have found as a buyer, is that there is usually an escrow fee that the buyer is going to suck up if the pre-buy determines that the airplane was misrepresented.

We split the escrow fee 50/50 with the seller when we bought the DA40 for the club. I expect to split it 50/50 with the buyer when I sell the Mooney...

In any event, I think the general expectation of the process goes like this:

* Buyer gets enough info verbally to be interested in the airplane
* Seller provides a copy of the logbooks for buyer to look over.
* Buyer makes offer. Seller either accepts as is, or haggling ensues. Price is agreed upon.
* Buyer and seller sign purchase/sale contract
* Buyer puts deposit and half of the escrow fee into escrow. Seller puts in half the fee and documents.
* Buyer's mechanic performs pre-buy inspection
* Transaction either proceeds as is, or issues are fixed based on previously agreed-upon terms in the contract, or price is renegotiated.
* Seller takes possession of airplane.

And, of course, the process can stop at any point up until the seller takes possession.

But yeah, if you called me asking to have your mechanic take my airplane apart and we hadn't yet agreed on a price and terms, I'd be pretty wary too. If your maximum desired price is 20% lower than my lowest selling price, or you have no skin in the game (ie money in escrow), I'd be afraid you were just going to have your mechanic tear my plane apart and leave it that way. So, you might want to consider that the seller may not be responding because they may be wary that you're a shady character, or they don't think you're a serious buyer.

 

[wabower]

The agreements aren't all that great, and almost more trouble than they're worth insofar as the "pick and choose" necessary to get something you can use in a given situation. Many of the on-line sample contracts are better.

Sounds like you're on the right path, AOPA also has template purchase agreements you might want to check out.

 

[Van Johnston]

Finally off the dime. Offer tendered Sun night, they countered and I accepted this morning. Now just need to execute. Thanks for everyone's help.