Purchase Process

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jflong

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jflong
Looking at making an offer on my first plane. What is the typical process when purchasing an aircraft from an individual ( no broker ). Google search shows letter of intent, purchase agreement, escrow, pre-purchase inspection etc.

Additionally, I’m reading some guys using annual in lieu of pre-purchase. I’m in Ohio and the seller is down South.

Just looking for some insight, but need to jump on this and get the ball rolling.
 
Letters of intent mean little. A purchase contract nails things down until the actual title transfer.

A repurchase and an annual are different beasts. An annual will tell you that the aircraft it supposedly airworthy today, without any evaluation as to what might need work soon or is otherwise suboptimal for the type. Now if you're buying a 172, that's fairly close. If you're buying something more elaborate, you want some type-specific evaluation.

You're going to want a title search to verify that the seller has clear title. Unless one of the two of you is foolish, you're going to want escrow (especially at a distance). It's absolutely mandatory if it is financed. It's a chicken and egg thing, the seller won't want to release the funds (or his bank won't) without the bill of sale and clear title, and the seller won't sign the bill of sale (or his bank release the lien) without the money.
 
What some people do it have the shop do the pre-purchase to determine major airworthiness issues. Then if the sale goes through, they complete the annual (which includes things like lubrication and adjusting some things). No reason to pay for those things if you are not going to buy it.

I bought my first plane over the summer. As I started looking, I applied for the loan. Made things faster once a plane was found, and helped the seller realize I was serious about buying. Found the plane, had a mechanic look over the logs, and based on the logs, made an offer. Although you can make an offer contingent on the log inspection and pre-buy, with the option to revise the offer.. If the offer was accepted, I placed deposit. After the first one, the deposit was already in escrow, so could be transferred very quickly.

Then had the pre-buy, and negotiated any issues. Once everything was good, contacted the loan company about the final price, and the escrow company, who did their thing. In my case, these last steps after the pre-buy too about 2 days. :)

I used Dorr Aviation for the loan. And Aero Space Reports for escrow and title services. Both were amazing.

And notice I talked about the deposit as if it was multiple times. It was. The first plane had some questionable things about the engine in the logs and the seller would not accept the revised offer. The second one would not ferry the airplane to a pre-buy and wanted it done on their field. The 3rd one, the owner backed out that day it was too be delivered to the pre-buy (address the seller backing out in the purchase agreement). The final one went smoothly, and about 10 days (over a holiday weekend) from first ad to completed sale.
 
I bought 3 planes over the years, it was a handshake & a personal check. I realize that won’t work in many instances.
 
jflong said:
on my first plane
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jflong said:
Just looking for some insight
Click to expand...
Do you have a mechanic lined to maintain this new to you aircraft? If not make that selection now and get them involved in your aircraft purchase. It will be your personal mechanic who signs your next annual that will have the final say so on the airworthiness of your aircraft regardless who performs the pre-buy check. I can't recommend this enough and especially to first time buyers. Good luck.
 
Their mechanic and a prebuy mechanic over there, might have differing opinions on how to maintain your airplane and what to sign off as airworthy compared to your mechanic. A difference in opinion means $$$.

Title
Safe transfer of money
Airworthy, logs and current condition
 
Folks have already mentioned an independent repurchase inspection - not an annual by the seller's mechanic.

Who is checking the FAA aircraft registry records to verify that the seller owns the airplane and that there are no unreleased security interests or liens on the airplane. One of my next steps is a purchase contract and the use of an escrow to check those things, to make sure the paperwork is proper, and that no money changes hands until all is proper.

Yes, many, maybe even most, "cash and a handshake" (but don't forget the necessary paperwork) work. And you can check the registry record yourself, but DIY is only as good as your ability to understand what you are looking at. All good...until you find you paid a few tens of thousands of dollars only to discover you can't register it. Basically risk/benefit. It typically costs more to fix a problem than to get it right the first time.

I've dealt with a few of these messes over the years but one favorite is the seller who innocently filled out the Bill of Sale wrong, but would not respond to his buyer's inquiries when the FAA rejected the transfer. (My real favorite was a more complicated and rare mess.)
 
Title search. Went out and checked some inspection panels. Looked over logs. Here's cash. Flew away.
 
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20 years ago I had told the local A/P I was looking for a plane. Told him what type I was looking for and the year range. A few months later he had attended some meeting with other A/Ps and had found what I was looking for. A week later it was in my name.
 
Escrow account title search and independent pre purchase.
 
combination of pre-purchase agreement and escrow. we discussed a bunch of stuff until we agreed and then put it in the purchase agreement. aopa escrow service was pretty good and they did a title search. I was pretty adamant about getting a pre-purchase inspection done by a mechanic who hadn't worked on the plane before. he was a little hesitant at first but we worked it out. communication was key.
 
The plane I have now, I had no prebuy inspection done other than by myself, but I talked to the A&P who'd done the last few annuals and other work on it. He had a very good reputation in the area and was known to be a stickler and the logbook entries reflected that, so I felt comfortable. He said he would have bought the plane himself if he could afford it.
 
There's no "one size fits all" answer. If you're mechanically inclined, know what to look for, know the make/model well enough, you can get away with a "DIY" prebuy and a bill of sale/immediate payment. If you're inexperienced, an independent pre-buy and a purchase agreement/escrow may make sense.
 
In the first case, I was too cheap to do a prepurchase inspection. It cost me a lot. On the other hand, the fixed up plane gave me great service. In the second case, I just paid too much in the partnership. The plane itself was rock solid. Until it wasn't, after a gear up landing by a renter from the FBO we leased it back to.
 
Thanks everyone for the input. It really helps to see many options. As much as I wish it was as simple as a hand shake and a check I don’t think that’s practical in my case. I went with the overall consensus:


1. Contact "Aero-Space Reports" aircraft title and escrow services company in Oklahoma City, and have them do a title and records search with the FAA on NXXXX. You can do this online.

2. Fly to New Plane to kick the tires and go for a ride if able.

3. Make an offer, sign a purchase agreement.

4. Put agreed upon earnest money in Escrow account with Aero-Space reports.

5. Get a pre-buy inspection done by mechanic of your choosing at your expense.

6. Based on pre-buy inspection report one of three things happens:

  • Seller pays to repair any airworthiness issues found
  • Sale price is adjusted accordingly and buyer agrees to repair airworthiness issues
  • Buyer or Seller may terminate the purchase agreement
7. Close the deal, which releases funds to seller and airplane to buyer.
 
Except, to shorten times, you can put the deposit/ernest money in escrow before you actually find a plane. I put the money in for the first plane, but left it there for later deals, which made things quicker.

And, as I said before, if you are financing, get approved first. That way you have a budget and you can also close faster. If you are looking at a desirable model, they move quickly

Oh, in your purchase agreement, address what happens if either party backs out for no substantial reason.
 
^^^^^^ This is what I did. It made it really easy to put down deposit money on the plane and show the seller I was locked and loaded.
 
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