Business Aircraft: How to Get Accurate Valuations

When it comes to buying and selling business jets and turboprops, everyone has an opinion. The buyer will have a good idea of what they want to pay, and the seller will know what price they want to achieve. The eventual sale price can be something quite different, depending on several aircraft-specific factors, and market forces...

For this reason, a professional evaluation of an aircraft’s value can prove very useful – helping establish an ask price in line with the aircraft’s true pedigree. As one local aircraft appraiser told AvBuyer recently, “Often, aircraft appraisals don't cost as much as they pay”.

A comprehensive aircraft appraisal would certainly pay if the owner discovers their airplane to be worth more than they realized. It also pays in terms of the time saved reconciling the differing opinions of buyers and sellers over what the  jet for sale is truly worth.

But, as with so much in aviation, getting the full benefits offered by any appraisal will hinge on a variety of factors that we will examine here.

The Key is in the ‘Accredited’ Part

As one busy aircraft appraiser explained, becoming an accredited appraiser involves significant effort, testing, and the stamp of approval from an organization of appraisers. The Professional Aircraft Appraisal Organization (PAAO) requires its participants to adhere to a specified set of ethics.

As the current organization that certifies, trains and tests would-be appraisers who seek its approval to become credentialed aircraft appraisers, PAAO came into existence a few years ago to fill the gap created when the previous appraisers’ association folded.

Since then PAAO has become the focus on recruiting, training and certifying aircraft appraisers, and, in turn, the appraisals they produce. Hence the emphasis on seeking an accredited appraiser.

The organization is careful in the professionals it selects, all of whom must demonstrate training, comprehensive research, and detailed reporting, along with credible, reliable opinions of aircraft values. Moreover, those accredited professionals only work within the aviation industry, and know it well.

Ethics in Appraising

Jeremy Cox, President and Senior Appraiser at JetValues-Jeremy, LLC is among the busier aircraft appraisers in the field. In 2020 he performed 98 appraisals, and among his favorites were the rare and unusual aircraft – particularly the one-offs. He recently had the opportunity to appraise a World War II veteran Douglas C-47 Skytrain, and was in his element examining the old aircraft, pouring over its decades of records and logs.

“I love those old, unusual aircraft. It's more interesting for me as an appraiser than another business jet – though I love doing those, too.” Among his recent business-jet appraisals was a Bombardier Global of far more recent vintage. “Every appraisal is different, requiring attention to the details.”

But buyers and sellers should not expect a ‘yes-sir’ nod to their valuation suggestions from an ethical accredited appraiser. “I consider it to be unethical for me to be engaged in any form of aircraft transactions. It's wrong,” Cox states.

Not that everybody who seeks out an appraiser's work understands those limitations up front. “Somebody will come to me to do an appraisal, and they will give me their impression on what it's worth,” (which the person is free to offer). “Talking to me about an airplane during an appraisal is confidential.”

By confidential, Cox means on a level akin to a confessional with a priest, or a conversation with an attorney working for the client. “Nevertheless, it is unethical for me to take a pre-arranged valuation and use it as the appraisal,” he clarifies.

Cox applies those ethical limitations to all his work, whether he’s undertaking a ‘desktop appraisal’, performed using the aircraft records, but without visiting the aircraft, or an ‘on-site appraisal’, for which the appraiser visits the aircraft in-person, inspects it, and reviews the totality of its records.

Understand the Fees and Variations

Naturally, appraisers charge more for on-site appraisals than for desktop ones. And appraisers tend to set a different fee level for different categories of aircraft – a fee schedule which potential clients should request and receive before contracting with an appraiser.

As an example, the fees Cox charges vary according to the aircraft's maximum gross take-off weight (MGTOW) and, of course, the aircraft type. Beyond these, appraisers set their fees according to the number and type of engines (i.e. single- or twin-engine piston; single- or twin-engine turboprop; single-engine, twin-engine, or tri-jet).

“For a full on-site appraisal, where I am required to travel to where the airplane is, I apply a rating system based on what's in front of me, and I work through the logbook,” Cox explained. “I photograph the logbook pages for future reference.”

“The appraiser is there to observe the condition of the aircraft. They are not seeking out legal and compliance issues (about the aircraft). The appraiser is not functioning in the role of a policeman.

“They are simply there to seek out all the issues that might impact the value of the aircraft,” Cox clarifies. After that on-site visit, the appraisers typically return to their offices to complete their reports.

Tips When Hiring an Appraiser

The appraiser is “there to seek out all the issues that might impact the value of the aircraft,” Cox continues. When they complete the appraisal, the product of that effort should be a detailed report for the person who hired the appraiser.

When selecting a trustworthy appraiser, Cox offers the following tips:

1. Make sure they're accredited, have earned and maintained an accreditation by an association, or that they follow the Uniform Standards of Professional Appraisal Practice (USPAP), the generally-recognized ethical and performance standards for the appraisal profession in the US. USPAP is updated every two years so appraisers have the freshest information they need to deliver unbiased and thoughtful opinions of value. Prospective appraisers should show evidence, such as a certificate, of continuous education in the profession.
2. Make sure the appraiser will deliver a written report. Ask for copies of past appraisal reports, redacted to protect the confidentiality of the person or company that commissioned the appraisal.
3. Once hired and the appraisal is done, the report should contain the fair-market value on the date of the appraisal; a statement on Provenance; its value in five and 15 years; a Certificate of Orderly Liquidation Value; a page with comparative sales of the same or similar aircraft; a page with a Forecast of Future Values (basically depreciation); and a certificate of appraisal and document of professional affiliations such as PAAO or the American Society of Appraisers. If the appraiser ‘hedges’ on producing any of these details, Cox says, you should consider looking further in your search for a suitable appraiser.
4. Another document to seek is IRS Form 8283, for non-cash charitable contributions. The appraiser must sign that form, and it literally needs to depict a fair-market value – the IRS can hold you liable.
5. If the appraiser you’re talking to is willing to be swayed by your opinion, they're unethical. With the above tips, and a solid understanding of the effort and training that goes into becoming an accredited appraiser, buyers and sellers of business aircraft will have a good idea of how to understand the true worth of an aircraft for sale, and come away from a deal happy. Hiring the right appraiser is worth its weight in gold to those tasked with aircraft ownership.

Jeremy Cox is the President, Senior Appraiser and Expert Witness at JetValues Jeremy, LLC – an aircraft appraisals company that he founded in 2019.

Very active in the aviation industry, he holds valid A&P, IA, and FCC Licenses, and a Commercial Certificate with Instrument Rating. His aviation career began age nine when he started helping out at the UK-based Dorset Gliding Club.

He has since amassed a wealth of experience and knowledge with full service FBO and repair stations, aircraft parts manufacturing companies, and as Vice President of aircraft sales company JetBrokers, Inc., before focusing on a career as an accredited appraiser.

More information from www.jetvaluesjeremy.com and https://appraiseaplane.org/