Avoid Losing the Perfect Used Jet Deal

Everybody relies on the expertise of others, but how can used aircraft buyers test the advice they receive in an aircraft transaction? Jet Tolbert explores…

Jet Tolbert  |  18th August 2017
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    Jet Tolbert
    Jet Tolbert

    Jet Tolbert is president of Florida-based American Aircraft Sales where he oversees all aspects of aircraft...

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    Used Private Jet Deal

    Throughout life everybody relies on the expertise of others. The right advisor will be of enormous benefit, particularly when the monetary stakes are high as they are when buying or selling a business jet. Jet Tolbert highlights how used aircraft buyers can test the quality of the advice they receive in an aircraft transaction…

    Occasionally things go wrong. Advice may come from the wrong source, leaving a would-be buyer of a used jet reeling from the lost time and money invested into a botched aircraft acquisition.

    To avoid being in that position, take a look at some of the signs that you may be headed for troubled waters, and explore how to get the transaction back on track.

    Following, we’ll consider each of the crucial players involved in an aircraft transaction, outlining the good traits each team member should have as well as some actions that aren’t so good.

    The Broker

    Your aircraft Broker should be taking a consultative approach to identify your needs and evaluate the aircraft type and acquisition structure that would ideally suit you. A good Broker of used aircraft will not only advise you of suitable options being advertised, but will alert you to those coming to market before they are in the public eye. In addition, you can expect some comparative value analysis to be made available to you.

    Since well-established Brokers are transactional experts, you should expect them to reference additional specialists when requested, whether Attorneys, Escrow Agents, Technical Inspectors, Tax Advisors, Customs, Delivery or Transition Crews (and everything else in between).

    Furthermore, a good acquisition agent/broker will be part-Salesperson, part-Psychologist, part-Mechanic, part-Pilot and part-Businessperson.

    If, however, you find yourself waiting a long time for information or receiving data that are confusing and difficult to understand you might need to rely on another advisor or move to a different Broker to help you acquire your next aircraft.

    Finally, the sale of an existing aircraft often needs to be coordinated with the purchase of a used aircraft under consideration. If that is your situation, it would be wise to identify any potential conflict of interest when selecting the seller’s agent. Conflicts might arise, for example, if your aircraft is under a management arrangement with that agent, or if the aircraft is placed with the OEM for resale. Before selecting your agent, careful measures should first be made to ensure conflicts do not occur.

    The Aviation Attorney

    The good aviation Attorney is often the unsung hero of the deal. A skilled lawyer will hardly ruffle a feather, and a reasonable buyer and seller will agree to paperwork quickly because this aviation professional will anticipate the needs of both sides of the deal. Additionally, an experienced Attorney (like an experienced Broker) will be able to offer you great recommendations in the areas of Escrow and Tax.

    Customers who have the best experiences transacting used jet aircraft employ aviation-specialized Attorneys who are responsive, thorough, and move quickly to make sure the deal is secured and the purchaser’s investment protected with proper safeguards in place, without the need for every document to be rewritten.

    Additionally a seasoned aviation Attorney will advise how to title the asset to best meet the buyer’s needs.

    On the other hand, the most difficult deals often involve Attorneys from large law firms who might know something of airplane transactions, but their expertise lie in other areas. I’ve seen buyers work with such firms and rack up bills while draft agreements and documents are pushed back and fore almost daily, creating a real danger the seller will lose interest in the transaction.

    The Technical Inspector

    If sourced correctly, this player is often the star of the pre-buy process. The Broker may keep the paperwork flowing between relevant parties, but the Technical Inspector is the expert who sees the airplane in person and takes delivery on your behalf. Often a buyer’s Broker will be able to make a recommendation for technical delivery assistance.

    A good choice for a Technical Inspector will be someone offering many years of experience in taking delivery of aircraft as a Flight Department Manager or Director of Maintenance. They should be prepared to review technical information of an aircraft in conjunction with a Pre-Purchase Inspection, and may even help lay out some pre-requisites for desirable aircraft in the initial selection process.

    After the Pre-Purchase Inspection they help with delivery by confirming the aircraft is returned to service in the manner agreed to by all participants and that all pertinent documentation is present and accounted for at closing.

    Using someone who isn’t experienced in this regard will risk a buyer needing to come back to the seller after closing, trying to iron out discrepancies and locating missing items that should have been delivered.

    The Escrow Agent

    Even if I were buying an airplane from a relative I would want to talk with an Escrow Agent. It is essential to select someone who is competent. A good escrow company will have staff standing-by at the FAA records department. This kind of connection to the FAA is invaluable when it comes time to file documents.

    US escrow companies have streamlined the process of handling funds and documents to the point that even in international transactions where both the buyer and seller are based outside the US, an Oklahoma City Escrow Agent typically is selected to manage the funds.

    On one occasion I saw a deal go down the tubes when the Escrow/Title Company had only one employee qualified to manage documents and closings.

    Unfortunately, that person became chronically ill and it became almost impossible to get the funds transferred to another Escrow Agent.

    Other concerns should focus on confidentiality. The parties to a contract should be the only ones communicating with the Escrow Agent regarding that contract, unless there is express authorization granting access to another contact. If your Escrow Agent is discussing your sale agreement with a third party, you need to change your team and find a new Escrow Agent.

    In Conclusion

    Buying an aircraft can be done on a handshake, but the opportunities are limited and the possibilities for confusion endless. Begin building your team with a reputable Broker, and open the door to a process managed efficiently and seamlessly. Assembling the right team of advisors will make all the difference in the world. Who wouldn’t want a smooth, flawless transaction surrounded by the best advisors?

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