The craft of appraising an aircraft is a complex procedure. Having a basic understanding of the questions to ask an appraiser is important—whether you are the buyer or seller. This guide will help cover all bases.
Step 1: Know When An Appraisal Is Necessary
In most cases, an aircraft should be appraised before being purchased or securing financing. Unless a financial institution requires one, there are some instances when a seller may be better off not conducting an expensive appraisal. However, there is a list of other occasions that warrant an appraisal. These include:
*Refinancing an aircraft.
*Changing an aircraft’s insurance coverage based on its value.
*Selling a share of an aircraft (I.e. a NetJets membership).
*Estate planning.
*An aircraft is involved in litigation.
*Taxation purposes, including amending an aircraft’s use for either business or pleasure.
*An insurable event, such as damage caused by a ground handling accident.
Before moving on to the next step, it’s also best to have an idea what your airplane is worth to begin with. Basic sources to gauge a value can be determined using Aircraft Bluebook or a price index.
Step 2: Selecting A Qualified Appraiser
This step is crucial and can be a bit challenging since there are quite a few options. Things to consider when selecting an appraiser include:
*Ensure they are accredited by the American Society of Appraisers or through another professional appraiser society. If they aren’t accredited, this isn’t necessarily a dealbreaker, but make sure they have good experience and the person who is referring you is trustworthy.
*Ensure the appraiser has extensive experience with similar aircraft makes and models. Some are well versed in many aircraft types, but you wouldn’t want a piston aircraft specialist appraising a large-cabin business jet. If they don’t have competence in a particular aircraft type, at least make sure they demonstrate how they will attain reliable information.
*Ask how long your appraisal will take. The industry standard is about 5-7 days, however appraisers are quite busy and may be challenging to lock down in a timely manner.
Step 3: Determine The Scope of Work/Type Of Appraisal
There are two major types of appraisals, and based on your budget and appraisers’ recommendation, you will choose one of the following:
*Desktop Appraisal: An appraiser uses information provided by the client, such as aircraft logbooks and maintenance schedules, to compare to current market data. This determines a value. It is estimated that more than half, around 60-75%, of all appraisals, are desktop appraisals. This determination is numbers-driven and does not involve a physical inspection of the aircraft, which leads to the next type of appraisal.
*Physical Appraisal: The most precise, expensive and detail-oriented appraisal that involves being hands on in evaluating an aircraft. An appraiser will check the engine, open panels and check the entire aircraft. This will produce cabin layout drawings, aircraft photos and a registration and airworthiness certificate copy. This appraisal builds off data received in a traditional desktop appraisal. In many cases, a bank may require this type of appraisal, as it may catch certain things that slip through the cracks of a desktop appraisal, such as undisclosed damage history. Keep in mind that appraisers may not be certified mechanics, meaning sometimes a physical appraiser acts as nothing more than a formality.
*Pricing Digest Evaluation: This is more of a bonus category and may not even require an appraiser. It is the cheapest and most simple type of appraisal because aircraft pricing is determined based off of published data. Information generated can be very generic and not compatible if an aircraft has more complex features. It also does not account for current market conditions. Think of it as a 10,000-ft. overview.
Step 4: Gather All Information
As mentioned earlier, appraisals should take about a week after you schedule it. When the time comes for the appraisal to be done, you don’t want to be scrambling for any missing documents or logbooks. Make sure all these materials are ready when the appraiser arrives. A reliable appraiser will list what needs to be made available beforehand. Make sure whoever handles an aircraft’s operations department is on top of it.
Step 5: Know What Your Appraiser Is Looking For
Knowing what your appraiser will be inspecting is a proactive way to ensure your aircraft remains in good shape. This also means any discrepancies will be less likely to catch you off guard. Factors that affect an appraisal price include:
*Year, Make and Model
*Interior and Exterior Conditions
*Includes paint, carpet and seating.
*Times on the Engine, Airframe, and Auxiliary Power Unit
*Used to measure performance. High times = less value.
*Avionics
*Airworthiness Directives (ADs)
*ADs that are not complied with decrease an aircraft’s value due to the cost to abide by them.
*Logbooks
*Location
*Environmental factors can cause different effects to aircraft over time. The effects of humid, coastal climates are different than inland, dry climates. Additionally, if an aircraft is based in another country, this can also cause a different set of regulatory roadblocks.
Final Step: Understand The Market
Simply put, there are good times and bad times to buy and sell aircraft, and at the end of the day, the market will have the last word. In a strong market, aircraft sell for more than they are worth, and vice versa in a weak market.
