Jeremy Cox discusses the pre-buy inspection from an appraiser’s perspective. Why don’t appraisals pick up everything that comes up in the inspection? And why are sellers strongly advised to pre-empt the inspection with a ‘mock’ inspection?
I have yet to meet a director of maintenance (DoM) in charge of an aircraft who’s not extremely proud of the care they give their aircraft. However, as a broker I would often feel bad for the DoM whenever their aircraft was subject to a pre- buy inspection.
That aircraft was akin to a child who’d been under their supervisory care. As the list of squawks piled up they would tend to take the list very personally as though they’d been negligent in some way (which is rarely ever the case).
Consequently, the pre-buy environment from a seller’s point of view is rarely a happy place and can be likened to finding oneself behind enemy lines.
The simple fact is that it’s the MRO’s job to find issues with your aircraft. The reality is that there’s no such thing as a perfect aircraft. Not even if the jet just came off the production line, has been test-flown, and has been freshly issued its certificate of airworthiness.
But how can you lessen the list of squawks found on your aircraft in a pre-buy inspection? We’ll give this some thought over the following paragraphs.
What Is and Isn’t Covered by an Appraisal?
Today, as an appraiser/auditor, I’m frequently engaged to develop an opinion of value based on condition, maintenance status, upgrades and compliance during the sales transaction. Usually this is prior to closing and on behalf of the lending bank who will finance the purchase.
Often, upgrades, modifications and/or refurbishments (paint, interior and engine overhauls) are included in the financing that the buyer has applied for. In these instances, an appraisal report may be composed with a ‘hypothetical condition’.
This condition may be directly related to a specific assignment, contrary to what’s known by the appraiser to exist on the effective date of the assignment, but is used for the purpose of analysis.
Hypothetical conditions are contrary to known facts about physical, legal or economic characteristics of the subject property, or are about conditions external to the property (such as market conditions or trends), or about the
integrity of data used in an analysis.
Rarely (if ever) included in in the report is a value allowance for squawks found during the performance of the pre buy. The assumption is that the aircraft is airworthy in respect to status and condition, or that it will be before closing.
Conversely, if the seller were to engage an appraiser prior to putting the aircraft on the market the report should include:
- A list of desirable (sale-enhancing) features on the subject aircraft
- A list of detracting (sale-injuring) features on the subject aircraft
- Suggested asking price
- Predicted sale price
Consider Performing a Mock Pre-Buy Inspection…
No appraiser will remove inspection covers, panels, or perform any conditional tests. Observations will be made visually as well as through logbooks and records analysis.
Any hidden squawks or value/desirability-detracting conditions will remain hidden, unless you’re smart and have your aircraft undergo a ‘pre’ pre-buy inspection, which can save time and money, and avoid potential buyer rejection once your aircraft makes it to the real pre-buy inspection, as paid for by the aircraft purchaser.
What are the Common Squawks Found in a Pre-Buy?
Some – but not all – examples of squawks that are regularly found during an appraisal audit or pre-buy inspection, notwithstanding malfunctioning or failed systems or components, follow. They should highlight the value of having a mock pre-purchase inspection before the aircraft is placed on the market…
- Poor math, handwriting and/or reporting of time and cycle tracking over time;
- Maintenance tracking program does not match the aircraft’s records;
- Actual major component serial numbers do not match the aircraft records;
- Loaner components (i.e. engine, APU or landing gear) is installed in place of the correct component(s);
- Component overhauls have been overlooked/missed;
- The aircraft is currently being operated on a non-transferrable OEM extension letter or AOC-approved aircraft inspection program;
- Mandatory and recommended Service Bulletins have not been complied with. (Depends upon the negotiated terms of the purchase agreement);
- Missing paperwork (i.e. interior burn certifications and reports);
- Outdated equipment list (items listed have been removed/new items not listed);
- The AFM is missing required supplements;
- The interior configuration is unapproved following changes that were incorporated;
- Missing ‘fly-away kit’ items;
- Unknown or undisclosed damage history;
- Some logbook entries are written in a foreign language;
- STC-equivalent modifications installed which do not conform to, or meet with FAA standards through reciprocity;
- Unapproved parts installed;
- Corrosion found;
- Existing damage (dents or buckles) have not been reviewed for airworthiness eligibility and compliance;
- Flight Data Recorder’s recorded parameters are insufficient to meet the requirements of an operating rule or regulations that will govern future flight operations. (Depends upon the negotiated terms of the purchase agreement);
- Inability to receive importation certification on a foreign registry. (Depends upon the negotiated terms of the purchase agreement).
Pay Now or Pay Later
The age-old saying is relevant when an owner/seller is faced with having their aircraft undergo a pre-buy inspection in the near future. Either pay now or pay later. Either way, you’re going to pay, but the longer you wait the more it is likely to cost you. Please heed our advice and arrange a ‘mock’ pre-buy before you undergo the ‘real’ one. And engage an appraiser prior to putting the aircraft on the market.
More information from www.jetvaluesjeremy.com
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