November 14, 1998 Ask the Appraiser

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by	Brian Jacobson

About the Author ... Brian Jacobson has over 12,000 hours in all types of general aviation aircraft from trainers to jets. He has been flying since 1970, and earned most of his certificates and ratings on the East Coast in the early 1970s. His first aviation employment was as sales manager at Air Worcester, Inc., an FBO in Massachusetts. Through the years, he worked for several FBOs selling airplanes and flying charters. For nine years, he was chief pilot for a division of ITT based in Providence, Rhode Island, and later was a bizjet captain for Textron, Inc., out of Providence, Augusta, Georgia., and Pontiac, Michigan. During those years, he flew real-world IFR in all sorts of weather and some of the most congested airspace in the world. Since 1988, Jacobson has been a member of the National Aircraft Appraisers Association, and owns and operates a firm called Great Lakes Aircraft Appraisal, appraising airplanes for buyers, sellers and financial institutions. He also helps individuals and businesses buy aircraft by evaluating their needs, recommending the type of aircraft they should purchase, and helping them locate and procure those aircraft. Jacobson is also a professional aviation writer. He is a contributing editor for AVweb, Aviation Safety, and IFR Refresher; a contributor to Plane & Pilot; and can be heard on Belvoir Publications' Pilot Audio Update. In October 1996, he published his first book, Flying on the Gages, in which he discusses his experiences flying IFR. In May, 1997, his second book was published: Purchasing & Evaluating Airplanes. His books are available from Odyssey Aviation Publications.

Over the years, I have been asked many questions by prospective aircraft buyers about various aspects of the purchase process. Many of these questions reveal the questioner's lack of knowledge about buying aircraft, and demonstrate the need for a prospective buyer to learn as much as possible about the process before plunging ahead. This article is a collection of some of those those questions, together with my answers, and should be helpful to those who are about to purchase an aircraft.

Buying an airplane involves a series of critical steps, most of which cannot be omitted without serious consequences to the purchaser. If any of them are skipped, the most common result is thousands (and sometimes tens of thousands) of dollars in expensive repairs that were not expected. Other detrimental side effects include accidents, title problems, and seriously overpaying for the aircraft.

The following questions and answers speak for themselves:

Q.	I am planning to buy my first airplane. I will get my instrument rating in it. How should I go about selecting the airplanes to look at and what kind of equipment should I expect them to have?
A.	You should only consider aircraft that are already equipped for instrument flight. To buy an airplane and then add a complete avionics package will put you on the back side of the "financial curve" right away. That means that you need to do some homework. Become familiar with the types of avionics that are current so when you start to look at airplanes that are for sale you will know which boxes are legal to use and which are not. There are still many old 360-channel nav/coms in use (often as the #2 radio), and the com portion of such radios are generally not legal to use. Also, although the trend is to digital "flip-flop" radios, there are still some good radios around that offer mechanical tuning. As GPS becomes more commonplace for navigation we will be upgrading to GPS/coms, so I wouldn't be afraid of buying an airplane that has older mechanical style tuners because we will be upgrading them in the future anyway. But make absolutely sure that the radios you're buying are still legal for use in today's ATC system.
Q.	Is there a way to be certain that an airplane advertised as having no damage history really has not been damaged?
A.	A very thorough look through the logbooks and accompanying FAA 337 forms (Major Alteration or Repair Form) for each airplane is mandatory. You have to know what you are looking for. Recently I ran across an entry in an airframe logbook that simply said that "repairs were made to this aircraft." There was nothing else to indicate what the repairs were. Because the airplane was registered in Canada at the time the entry was made I had to jump through some hoops to find the official records that are maintained by Canda's Ministry of Transportation. I discovered that the airplane had been severely damaged when it swerved off a runway and hit a fence. Your title search company can search the FAA file on the aircraft you are thinking of buying and provide you with copies of any FAA 337 forms that are included. You can compare those to the ones that are included with the airplane's paperwork. Sometimes FAA 337 forms regarding damage history are removed from the aircraft records by those who are attempting to sell the airplane as undamaged. Don't overlook the prepurchase inspection, and be sure your mechanic looks carefully for unreported damage.
Q.	Just how important is a prepurchase inspection?
A.	The prepurchase inspection is absolutely essential before closing on an airplane. It is your last chance to be certain that the airplane is exactly what you think it is. To be useful, the prepurchase inspection must be done by a mechanic hired by you, not one whose allegiance is to the seller. Skipping the prepurchase inspection can cost you thousands (or tens of thousands) of dollars in unexpected repairs that could have been negotiated out of the price of the airplane. There have been many cases where people did not buy the airplane because of the results of the inspection. Too many aircraft purchasers don't want to spend the money on the inspection especially if the airplane is coming with a "fresh" annual, but if you don't do the inspection it is likely to cost you more money later on.
Q.	How do paint and interior affect the purchase price of an airplane?
A.	Paint performs two jobs on an airplane. It covers and protects the skin and external components, and it gives the airplane a pleasant appearance. There is no way to accurately depreciate a paint job because we don't know how long it will last on a particular airplane. The buyer and seller probably have different opinions on the airplane's cosmetics with the seller feeling that the airplane still is attractive and doesn't need a paint job while the buyer will see the wear, aging, and small defects in it and want to rehabilitate it. The same is true of the interior. The aircraft pricing schemes that are being used today consider that the aircraft's cosmetics should be "good." But if you want a more reasoned approach have a professional aircraft appraiser look at the airplane and write an objective report on it. A good appraiser can quantify the cosmetics and put a value on them as part of evaluating the entire airplane.
Q.	I am looking at an airplane that has had its elevator replaced because of hangar rash damage. I am told I should deduct anywhere from 5% to 25% from the value of the aircraft because it is damaged. Is that true?
A.	No. In the case of a single damaged component being replaced completely with a new or undamaged serviceable unit, there is usually no damage deduction. Generally, a damage assessment involves some sort of structural damage or a repair to a control surface or the airframe that does not remove the damage but hides it. However, every instance must be evaluated on its own merits because the significance of the damage can vary depending on how the incident occurred and how well it was repaired.
Q.	In many advertisements I see claims that the airplane is a 10/10. Just what does that mean?
A.	It is appropriate to ask a seller to rate the paint and interior of his airplane on a scale of 1 to 10 with 1 being very poor and 10 being outstanding. However, most appraisers reserve the 10 rating for new aircraft only. In my experience, an aircraft claimed to be 10/10 usually winds up being anywhere from a 7 to 9 on the scale, because there is a great deal of seller "emotion" included in the evaluation. Another part of the equation is the seller's consideration that any flaws in the aircraft are minor and should not be counted, while a buyer looks at flaws with just the opposite view. And, the claim of new paint and interior doesn't mean an automatic top rating. Some paint jobs and "rerag" interiors leave much to be desired.
Q.	Should an airplane that is stored outdoors bring less money than one that is kept in a dry hangar?
A.	The appraisal process on an airplane usually takes into consideration the condition of the paint, interior, and other components that could be affected by being stored outdoors. So, to discount the value of an airplane solely because it is kept outside is not practical. It is the overall condition of the aircraft that determines what it is worth.
Q.	What paperwork is required to transfer the ownership of an aircraft from one person or entity to another?
A.	AC Form 8050-2 is the generally accepted FAA form used for transferring ownership. It is available at most FAA offices or through dealers or brokers. This form is not mandatory, however. A legal bill of sale may be drawn and submitted to the FAA for recording as long as it provides the information the FAA needs to compile its records (e.g. the information found on the AC Form 8050-2). Also, a completed FAA Aircraft Registration Form (AC Form 8050-1) should be filled out and mailed to the FAA with the bill of sale. The mailing information and instructions for filling them out is located on the cover sheets of both documents. The pink copy of the registration form is retained to be used as the temporary registration until the permanent one is issued by the FAA. There is a five dollar registration fee.
Q.	I am considering buying an airplane that is in the shop right now for major overhaul. Should I wait for the job to be completed?
A.	Unless the engine is a factory overhaul or remanufacture, I would want to see it get 25 to 50 hours in flight before purchasing the airplane. Any "infant mortality" problems that result from the overhaul should show themselves in that time. Also, be certain you are familiar with the warranty terms. Factory warranties are clear and the factories are generally good about standing behind them, but sometimes individual shops and mechanics offer a warranty but don't live up to them when something goes wrong. Talk to the shop owner about the type of overhaul he is doing. All overhauls are not created equal. The questionable shops disassemble the engine, clean the parts, replace those that are marginal, and put it back together. The good shops replace many more parts with new and generally have higher standards for reusing components. Cheap prices on overhauls usually mean cheap overhauls that won't make it through another TBO period. Do your homework on this one, because if the seller is paying he may not have the incentive to see that it is a quality overhaul that will go the distance. With overhauls, you usually get what you pay for.
Q.	My mechanic told me he doesn't do prepurchase inspections. Who does?
A.	Some mechanics are leery of liability so they claim there is no such thing as a prepurchase inspection. They insist that you tell them what you want done before you purchase an airplane and they will comply with your list. That way if something goes wrong soon after the closing the buyer can't come back and claim that the mechanic missed it during the prepurchase inspection.
Q.	What does the term "fresh annual" mean in an ad for an airplane that is for sale.
A.	In a legal sense "fresh annual" means that the airplane has or will be inspected in accordance with an FAA required annual inspection before you purchase it, and that you won't have to do the inspection again for another 12 months. However, the buyer should never take the seller's word that the annual that was performed, or will be performed before the purchase is complete or thorough. If the buyer fails to do a thorough prepurchase inspection, he is allowing the seller to hold his wallet hostage. All annual inspections are not the same. The seller's mechanic may allow items to pass that the buyer's mechanic would not. If the prepurchase inspection is skipped because the annual was performed prior to the sale the buyer may not find out he has a pig in a poke until something breaks or the next annual inspection comes around.
Q.	I am looking at an airplane that has been reconstructed after being in a serious accident. How will that affect the value?
A.	It depends on the amount of damage, who repaired it, and how it was repaired. There are some who would deduct as much as 25% of the value of an aircraft because of serious damage history, though that may be excessive except in the worst of cases. The make and model of the aircraft will also have an influence on the deduction. For example, those who buy Beech Bonanzas expect them to be pristine, for the most part, and many will not buy a formerly damaged Bonanza no matter how slight the damage. So, a Bonanza with damage history might take a big hit, while a Cessna 172 with the same type of damage might not be adversely affected because it is not unusual to run into Skyhawks that have been damaged in the training environment. A professional aircraft appraiser should be consulted before you purchase an aircraft with damage history. That is the only way you can be sure that you are paying a reasonable price for the aircraft.

I answer questions like those above on Trade-A-Plane's web site. The name of the on-line service is "Ask the Appraiser." To access it you must be a subscriber to Trade-A-Plane or Trade-A-Plane Online. Enter the classified section and then click on the "Ask The Appraiser" button. The purpose is not to appraise airplanes, but to answer questions about the purchase process or specific problems that readers have run into in their quest to purchase an airplane. Most questions will be answered either by email or on the site itself.