Why Your Broker Must Be Present At Pre-Buy…

Buying a business jet or turboprop? Who should represent you at the aircraft pre-buy inspection? Jeremy Cox offers insights, highlighting the added value to buyers of having the broker present at this vital part of the transaction

Jeremy Cox  |  09th May 2018
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    Jeremy Cox
    Jeremy Cox

    Jeremy Cox was president, JetValues-Jeremy LLC and enjoyed direct interface between aircraft purchasers...

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    Aircraft Broker at Pre-Buy Inspection

    Jeremy Cox offers insights highlighting the added value to buyers of having their broker present at the pre-buy inspection…

    The only scenario worse than not having someone representing you in person at the pre-buy inspection that you are paying for, is to buy a friend’s aircraft over dinner and not have the pre-buy inspection performed at all.

    Why spend a significant amount of money on the aircraft, the pre-buy inspection and the related costs without being represented? The sole purpose of undertaking a pre-buy inspection prior to closing a transaction is to protect your (the aircraft buyer’s) interests.

    By the time you reach the pre-buy inspection you will have definite expectations regarding the aircraft you’re purchasing and the representations made about it. Before releasing the balance you agreed to pay for the aircraft, now is the time for those expectations to be evaluated on your behalf by an independent party that you selected to perform the inspection.

    At the very minimum, the independent inspection should accomplish all of the following:

    • Verify that the aircraft matches the sales specification (including times, cycles, equipment, status, programs and condition).
    • Confirm the existence, completeness, readability (English) and consecutiveness of all Logbooks and other required documentation.
    • Confirm there is no hidden damage, unsafe, or future expense condition existing that is otherwise unknown to you.
    • Confirm that there is either no damage history discernable from the records, or evident by inspection of the aircraft.
    • If damage history has been disclosed, confirm it has not been understated by the seller.
    • Confirm that everything agreed between you and the seller as ‘working and operating correctly’ is indeed working and operating correctly.
    • Assess and confirm that the aircraft is in an airworthy condition (or at the very least determine and report what must be accomplished to make it airworthy).
    • Confirm that the aircraft is eligible to be operated under the flight rules that you intend to use it for (i.e. Part 91, 121, 125 or 135).
    • Report what items may need refurbishment or replacement, and the projected life remaining (i.e. condition of brakes, tires, woodwork, leather, fabrics, etc.).

    Buyer Beware

    An honest, completely independent party should be up to the task in providing a detailed report on all of the items listed above. However, buyers should be aware that while the majority operating within this industry are honest and reputable, it is possible for a chosen party not to be as independent or as reliable as expected, and this is where having a broker on the team can help greatly.

    For example, you should avoid selecting an MRO/Inspector which has an existing, long-term relationship with the seller (creating a potential conflict of interests, even though you are technically (and financially) their current client).

    Although most MRO/Inspectors are reputable, a broker on the team removes the chance of an unscrupulous MRO/Inspector with a number of high value replacement components or parts for the same make/model using the pre-buy as an opportunity to use some of these items.

    Assuming you researched the MRO/Inspector and are satisfied that no conflict of interest can applies to your pre-buy inspection, it is also assumed you are confident the people that will perform the independent inspection offer great expertise and are extremely knowledgeable of the aircraft make/model to be inspected.

    If this is the case, you are ready to proceed with the inspection.

    Obviously, any opportunity to mitigate risk and additional expense (or discount on the agreed price of the aircraft) is definitely in the interest of the aircraft seller.

    This desire can be realized if the seller ensures that he/she has a personal representative in attendance, on-site, throughout the pre-buy inspection.

    This representative is the seller’s ‘eyes, and ears’, as well as their spokesperson. Why let them out-maneuver you by not hiring your own representative for this important event?

    Perhaps you planned on sending your Director of Maintenance (DoM) to oversee the pre-buy inspection. This ‘representative’ is indeed somewhat capable of the task assigned to them, but they may well be deficient in several areas that only a broker can provide for. Thus you are advised to also have a broker at the pre-buy on your behalf.

    Why Add a Broker to the Team?

    The first argument in favor of having a broker on your representative team is experience. Your DoM, may only have been involved in a handful of pre-buy inspections, whereas a broker likely has overseen dozens, if not hundreds.

    Next, although your DoM may have read the purchase agreement executed between you and the seller, your broker was involved in the crafting and refinement of that agreement and offers deep knowledge and understanding of the terms, and the agreed process.

    Furthermore, the buyer and seller might be likened to two steel plates. If they interact without a broker (akin to the grease that’s necessary to separate the plates) sparks will fly.

    The aircraft transaction can be fraught with emotional, reactionary opinions. The pre-buy inspection represents the culmination of the process.

    Instead of an amicable, fair transaction reaching a successful conclusion the deal could actually fall apart.

    In addition to keeping the MRO/Inspector objective, a broker should also ensure the work-scope moves along promptly, and the report is delivered on-time as promised. In short, the Broker has been there many times before.

    At the very minimum, ensuring that your broker is present at the pre-buy inspection should enable you to accomplish the following:

    • Ensure the MRO/Inspector maintains impartiality and perspective on the overall project.
    • Filter and explain the discrepancies and squawks before they are entered into the report in a way that may ignite anger by either party.
    • Help keep the MRO/Inspector ‘on-track’ and ’on-schedule’.
    • Help speed communications between all parties.
    • Ensure that the terms of the executed aircraft purchase agreement are all met and accomplished in a timely manner (i.e. performance clauses).
    • Suggest lower-cost or better solutions to repair defects and squawks.
    • Ensure that the best approach to repairs affecting value (diminution) will be handled and documented in the least-harmful way possible (in terms of safety and value).
    • Advise on which refurbishment and upgrade items make the best sense to meet the buyers’ needs, at the lowest cost but with the highest returns possible.
    • Expedite the approval of the squawks (in the case of the seller) as they are found, thus ensuring an ‘on time’ closing.

    The Cost of Scrimping

    We’ll close out this article with some insight into actual events that have occurred to other buyers (and sellers) who chose not have their broker at the pre-buy inspection.

    • The aircraft buyer, not fully understanding the terms of the contract as they applied to the pre-buy, walked away from the deal early (before the report had been issued) and was sued for breach of contract.
    • Another buyer, believing they had a deal, authorized the MRO/Inspector to accomplish upgrade work on the aircraft before they had technically accepted it. The seller, decided not to counter-sign the technical acceptance because they were more willing to lose the sale rather than have the MRO/Inspector repair the discrepancies found (they chose to fix the aircraft in-house). Today, the buyer is trying to sue the seller for the cost of upgrades that should never have been done in the first place.
    • A seller’s DoM was left insulted and angry at the discrepancies found by the MRO/Inspector and convinced the seller the MRO/Inspector was incompetent. The pre-buy findings were thrown out, leaving the buyer in a very difficult position: Accept; walk-away; go elsewhere; and/or litigate.
    • One buyer, not understanding the concept of ‘Airworthy’ and ‘not’, demanded that all discrepancies, including cosmetic issues, all be paid-for by the seller. The seller understandably refused and both parties walked away. Time and money were wasted, and the buyer lost their deposit.
    • An MRO/Inspector recommended an exchange part to cure a discrepancy when in reality there was plenty of time available at the stage of rectification for an overhauled part to be bought instead, at a much lower cost.

    Hopefully the case for your broker to be present throughout the pre-buy inspection process is clear. With the time and money invested in an aircraft transaction, why scrimp at this crucial stage at a cost of experience, good communication and in-depth understanding?

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