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The Do’s and Don’ts of Buying and Selling a Plane Featured

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In buying or selling, as in flying, you can minimize your risk by following the rules.

April 2015-

If there ever was an endeavor to which the phrase caveat emptor applies, it would be purchasing an aircraft. Even as a seller, you are still at great risk. We’ve all heard horror stories about both sides of an aircraft sale, and I’ve lived through a few myself.

In 35 years of doing this, I have developed a few rules to follow that will minimize your risk. Follow them and you significantly increase your chances of having a trouble-free transaction and ending up with a good airplane.

Buying an aircraft
Buying an airplane is one of those times where a healthy dose of skepticism is actually a good thing. Most of us who are considering a purchase will be looking at used aircraft, and some of those planes will be 30 or 40 years old. I can assure you that when they were built, no one expected them to be in service this long.

Rule number one: Remove yourself from the emotional aspect of the purchase. It’s an airplane. You’re not getting married. You can love the next one and not feel guilty. If your airplane purchase is driven by emotion, you’re more likely to accept a poor deal just so you can have it.
Rule number two: Trust, but verify. Please, please bring an independent mechanic into the deal to do a pre-buy inspection. Be prepared to spend $1,000 to $1,500 for the service. Why? An effective logbook review on a 30-year-old airplane is a six- to eight-hour proposition—and that is before they look at the aircraft! On turbine aircraft, you can spend $10,000 on a pre-buy. That is not a typo.
In this day and age, it is common to be able to get the logbooks emailed to you. Honestly, I turn down more deals due to the records than the condition of the aircraft.
If I see a signoff from a shop with a dubious reputation, or an ambiguous log entry for a major repair, missing Form 337s (FAA’s Major Repair & Alteration documents, which should be in the logs) or missing or cryptic AD compliance records, I get very skeptical.

If the logbooks check out, the next step is to verify that the components on the plane are the correct ones and that what’s recorded in the book has actually been accomplished. This takes time.

I once bought a plane with all ADs complied with, according to the logbooks… none of which had been done on the aircraft. When I discovered this after the sale, the seller’s response was that the ADs had been done on the plane when it left him, which to me implied that I needed to prove otherwise.

Okay, I got burned. I did turn the information over to his FSDO just so that they knew about it, but that didn’t get the work done on my plane.

Now let’s talk about damage history and inspections. “NDH,” or “no damage history” appears in lot of ads. To me, damage history is not a deal breaker if it has been properly documented, properly repaired and the price has been properly adjusted.

Allow me to give you an example. I just sold a twin for a client. It was a 1980 model. In 1981 it had a nosegear collapse that was documented and repaired by the factory. It has been flying like that for 34 years. The plane was discounted by $12,000 and the buyer understood and accepted that.

The same aircraft suffered a prop strike (no sudden stoppage) in 2003. The engines were torn down by the factory (in accordance with the manufacturer’s AD) and the props were replaced with new. This, too, was documented and the aircraft was discounted another $12,000, even though none of the damaged components remained on the aircraft.

The aircraft was priced $24,000 under market due to its known damage history. The buyer knew about the damage, was satisfied with the documentation and carried out an extensive pre-buy, including a borescope inspection of the crank and cam (which confirmed that they were indeed in good shape). I’m sure he spent a fair amount of money on that pre-buy, but the plane was discounted significantly more than he paid for the inspection.

Inspections are another hot button for me. You will see the words “fresh annual” in a lot of ads. But if it’s not signed off legally, the plane isn’t legal to fly; if you have a problem, your insurance may not cover it and your certificate may be in jeopardy.

The FARs are pretty clear: you, the aircraft owner, are responsible for maintaining the maintenance records:
§ 91.417 Maintenance records.

(a) Except for work performed in accordance with §§ 91.411 and 91.413, each registered owner or operator shall keep the following records for the periods specified in paragraph (b) of this section:

(1) Records of the maintenance, preventive maintenance, and alteration and records of the 100-hour, annual, progressive, and other required or approved inspections, as appropriate, for each aircraft (including the airframe) and each engine, propeller, rotor, and appliance of an aircraft. The records must include—

(i) A description (or reference to data acceptable to the Administrator) of the work performed; and

(ii) The date of completion of the work performed; and

(iii) The signature, and certificate number of the person approving the aircraft for return to service.

(2) Records containing the following information:

(i) The total time in service of the airframe, each engine, each propeller, and each rotor.

(ii) The current status of life-limited parts of each airframe, engine, propeller, rotor, and appliance.

(iii) The time since last overhaul of all items installed on the aircraft which are required to be overhauled on a specified time basis.

(iv) The current inspection status of the aircraft, including the time since the last inspection required by the inspection program under which the aircraft and its appliances are maintained.

(v) The current status of applicable airworthiness directives (AD) and safety directives including, for each, the method of compliance, the AD or safety directive number and revision date. If the AD or safety directive involves recurring action, the time and date when the next action is required.

There’s more, but the main point is that the logs are your responsibility as the owner, not the mechanic’s.
If you are selling, a good set of logbooks proves you aren’t trying to hide anything. If you are buying, and the logbooks you receive are a collection of work orders and yellow tags thrown in a 9x12 envelope, maybe you want to buy a different plane.

Don’t even consider test flying a plane for sale unless you see the signoff for the annual and it’s signed by an IA (not just an A&P) and it states all ADs are complied with.

Title and escrow companies
Rule number three: Whether you are a buyer or seller, insist on using a title and escrow company. I use Aero-Space Reports and have done so for 25 years. They will run a title search. (FAA’s Aircraft Registration Branch published a list of 32 title search service providers in its document AFS-750-55, “Title Search Companies and Law Firms.” See Resources for more. —Ed.)
Do not—I repeat, do not—buy a plane with a lien or an encumbrance on it. I don’t care how old it is. You should insist on a clear title from the seller. Most title companies provide a service to clear up old liens. Yes, you can do it yourself, but it is time-consuming and expensive. Let the professionals handle it.

The escrow company will execute the details of the sales agreement. If the agreement says that the aircraft must pass a pre-purchase inspection and it doesn’t, you have a vehicle to get your money back—without going to court (most of the time).

Sales agreements
Rule number four: It is imperative that you have a good sales agreement. There are lots of them out there, but in general a good agreement will state that the buyer pays for the pre-purchase inspection; the cost to get it to that inspection; and, if the sale falls through, to return the aircraft to its original airport. (See Resources for a link to a customizable purchase agreement provided by the author. —Ed.)

The seller is responsible only for the airworthiness of the aircraft, a clear title and all logs and records. As a seller, you really don’t want to sell an aircraft that isn’t airworthy, anyway.

To be clear, airworthy items are components or systems required under the Type Certificate for that aircraft or under the FARs as required equipment. Ancillary equipment—equipment not required for flight, or type of flight—isn’t an airworthiness issue.

For example, in an aircraft that is VFR only, there is no requirement for the artificial horizon to work, because there is no requirement to even have an artificial horizon. The FARs do require that a failed component be disabled and placarded as inoperative, as well requiring the same is entered in the logbooks, but it isn’t an airworthy item.

An interesting example came with another plane I sold. It was not certified for flight into known icing, but it did have boots, electrically heated props and an alcohol windshield de-ice system installed. The boots didn’t work. (The shuttle valve had failed, and the owner didn’t want to pay to replace it since he lived in Florida and never saw ice anyway.)

The buyer was made aware that the boots didn’t work in the original sales agreement. However, at the pre-buy, the buyer insisted that they had to work or the plane wasn’t airworthy. He was incorrect, and under the terms of the contract he had to either proceed with the sale or lose his deposit. He chose to proceed.

Selling an aircraft is equally complicated. Every seller’s nightmare is to have their aircraft in a pre-buy inspection at a shop on the other side of the country after a deal falls apart. The shop says it won’t release the plane until it’s paid for, and/or the mechanics have found serious issues and are grounding the aircraft.
First, let me tell you that a shop can’t ground your aircraft if it is in license with a current inspection. You may need a ferry permit to fly it home—if there is really something wrong with it—but they can’t keep your plane.

As for getting paid, again, a good contract will stipulate that the buyer pays for the pre-buy inspection. I suggest you take the extra step of contacting the shop owner and verifying that this is understood. I prefer email because then it’s in writing.

Selling an aircraft
Rule one for sellers: Get a signature and deposit. The plane shouldn’t go anywhere until there is a signed contract (including a nonrefundable clause if the buyer doesn’t perform), and a deposit in escrow.
Rule two for sellers: Run your own title search. If you have owned the plane a long time, it is possible that a lien had been placed on the title during the time you owned it. It may not be valid, but it’s worth fifty bucks to find this out before you chase off a potential buyer.
As a general rule, I don’t allow pre-buy inspections on a plane I am selling to take place out of the country. I have done it once and that was enough. In that case, I insisted that the entire amount of the sale price of the aircraft be placed in escrow before it left the United States.

For pre-buys domestically, I expect the buyer to pay the cost to transport the plane to and from the shop, including the pilot and his/her transportation costs home if they leave the plane somewhere. This is a common and accepted practice.

Typically, I won’t “demo” an aircraft unless I’m convinced that the buyer is serious about the aircraft. It just costs too much to run an airplane—and before I spend my money, I want to be sure the potential buyer is really ready to spend theirs.

Rule three for sellers: Send as much information electronically as possible. Here in the age of cell phone cameras, there is no reason not to digitize the logs and to be able to send quality, detailed photos of the plane to the buyer. The more information you provide up front, the less surprise there will be as the deal moves toward closing.

Rule four for sellers: Be candid about any and all issues. If there is a known problem with the aircraft, don’t hide it. If you have a weak cylinder or a balky alternator, fix it first. You’re not going to get away with “good enough” at a pre-buy. Unless you are willing to discount the aircraft, it’s likely going to be cheaper to fix it yourself than pay the shop that does the pre-buy and discovers the problem.

Buying or selling an aircraft doesn’t have to be stressful. If you follow these guidelines, you’ll reduce your risk of regret. And if you have questions or specific issues, you can always contact me. (See Resources for details. —Ed.)

That’s one of the benefits of belonging to the association. You can talk to someone who’s been there and done that. I can’t promise I can fix what’s wrong, but I can explain your options.

Michael Leighton is an 8,400-hour, three-time Master Flight Instructor, as well as an A&P mechanic. He operates an aircraft maintenance facility in Spartanburg, S.C. You can find him on the web at flymkleighton.net. Send questions or comments to .

RESOURCES >>>>>

Aero-Space Reports, Inc.
aerospacereports.com
800-765-2336

AFS-750-55
“Title Search Companies and Law Firms”
PiperFlyer.org/AFS-750-55

Aircraft purchase agreement (sample)
PiperFlyer.org/acpurchase

Michael Leighton

561-738-7056


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