Selling an aircraft does not have to be an overwhelming endeavor. Keeping in mind the proper pre-sale procedures and knowing what pitfalls to avoid can make the selling process simple and eliminate unnecessary hurdles. Here is our advice on the most common mistakes sellers make and how to avoid them.
Setting an Accurate Valuation – A common mistake made by sellers is not knowing the true market value of their aircraft, ending up with unrealistic price expectations. Sellers should not base pricing solely on upgrades, Bluebook / VREF values, cosmetic changes, and listings that seem similar to their own. Sellers should carefully consider real-time market trends and changes. It is critical to use specific data about the subject aircraft – its condition, maintenance and usage history – to set an accurate figure. Valuations are also critical prior to performing any upgrades or cosmetic changes to best understand what features will help aid in the sale of the aircraft.
Set a Realistic Timeline – One of the most common issues where sellers misstep is establishing a realistic timeline to closing. Many think the process from the signing of the Letter of Intent (LOI) to closing should take only a few weeks, when in reality it could be longer. To avoid extra stresses and pressure, work with a transaction specialist and plan ahead to ensure that a realistic timeline is set, especially if there is an upcoming event like the end of a lease or new aircraft delivery. Also, try not to deter a buyer by pushing too hard for a closing, and be open to a compromise so that both parties can feel good about the transaction.
Allow Enough Time for the PPI – Often sellers don’t allow enough time for completion of a pre-purchase inspection (PPI). The PPI can vary from a simple log book check to a heavy maintenance inspection. What many sellers don’t factor into their timeline are delays that can occur during the inspection due to discrepancies found, and how long it takes to get parts and rectify any issues that need to be addressed. In addition, sellers should have someone from their technical team visit during the PPI, at the very least for the first few days, and regularly if it is a longer process. It is much easier to keep on top of things and make decisions on site rather than over email or through phone calls. Sellers also should incorporate a time buffer into the purchase agreement from the PPI to the closing date for any unforeseen circumstances that can in many cases delay a closing.
The Maintenance Fine Print– Many sellers will forget to review their “power by the hour programs” and understand their contractual obligations during a transaction. First, be sure that the items being performed during the PPI fall within the allowable guidelines for the programs that the aircraft is on. Second, check if the accounts are in a positive or negative balance state. Some programs will require sellers to pay the deficit/negative amount when selling the aircraft, which could result in an unexpected bill arriving after the sale is complete. Other programs allow you to cash out or transfer a positive balance, which is also helpful to be aware of ahead of time. Sellers need to know the ins and outs of their maintenance programs and coverage prior to the closing.
Consider the Closing Venue – A seller should create a list of locations for the closing – at the beginning of the transaction process – that will provide the best tax outcome. Sellers should always consult with tax advisors and understand the risks before committing to a specific venue, and also understand that venue’s specific requirements to document the transaction. The seller should also factor in the cost to get the aircraft to that location for closing. Considering these things ahead of time speeds up the sales process, avoids any unnecessary surprises and alleviates the buyer and seller from scrambling to try and find a last-minute solution that meets their expectations.
Follow the Steps – Sellers should never assume the deal is complete until the money transaction has cleared and the new owner takes official possession of the aircraft. The signature of the Aircraft Purchase Agreement (APA) is only one of the milestones on the way to a successful sale, but there are still a lot of hurdles to cross before the closing can happen. Work with your transaction specialist to ensure that the process goes smoothly and that both parties are comfortable with the terms. Oppositely, if a buyer is dragging their feet and isn’t allowing the process to advance, don’t be afraid to look for another buyer.
Seek Outside Council – Many sellers believe using their in-house legal department is the most prudent way to go, instead of using an aviation lawyer. However, an experienced aviation lawyer is a seller’s most valuable asset who will know best how to facilitate and execute an aircraft sale. Seek specialized expertise when selling your aircraft, just like you would seek a specialized doctor for a medical procedure.
If you are considering the sale of your aircraft or if you are ready to list, a transaction specialist like Jetcraft can help you put together a plan to ensure that you avoid these common mistakes. Jetcraft has helped over 40 sellers close on their aircraft in 2017 with more than 20 transactions currently pending and additional qualified buyers lined up for a variety of aircraft models. Contact us at [email protected] or find the details for your local sales representative here, if you would like to speak to someone about the selling process.