On Using An Aircraft Broker

12/20/2013

A good broker is worth his or her weight in gold and will maximize the value of your aircraft in the sales process... but good brokers are often difficult to find. Before you leave the fate of your aircraft sale, and your investment, in the hands of a paid third party representative, do your homework.

I have been doing aircraft acquisitions for clients for some 42 years. Last year, in searching for an airplane for a client, I came across what was described in Trade-A-Pane as a "gorgeous" 1967 S35 Beechcraft Bonanza. Clearly something was not correct in the ad as the S35 was not made in 1967 so I decided to call the broker to learn more about the airplane.

I placed three calls to the broker over an eight hour period but did not receive a callback until late the next morning... you never get a second chance to make a first impression. Upon introducing myself, I was immediately told is that the airplane was "in mint condition," there were "multiple offers on the plane," and that the seller "will not take anything less than the asking price" which was a bit high by book standards.

On paper, the airplane did not look like it was a "book" airplane with 100 hours on an IO-550 engine, a comprehensive radio package that included XM weather, stormscope, a Garmin 530W, air data computer, fuel flow, engine management system, and an STEC 60-2 AP with yaw dampener and altitude preselect system. But something did not make sense. There were no pictures of the plane, the broker was not sure of the total time on the airframe or the condition of the glass. Just the same, he assured me that my time would not be wasted to "come and see this extraordinary example of the Beechcraft Bonanza."

Since the airplane was located in Dallas, it would mean travel and living expenses for my client but the broker "swore" I would be "pleasantly surprised" so I bought a last minute, and expensive, airline ticket to Dallas.

When I arrived at Love field I was greeted by the mechanic who was involved in performing an annual inspection on the plane.... but this was no ordinary annual. A ruddervator was being replaced, another was being re-skinned, the flux detector for the compass system has broken off its mount in the left wingtip, the entire interior was water damaged and the paint and glass looked as bad as the interior.

After spending an hour looking at the logs I quickly learned that the Millennium cylinders were affected by AD 2009-16-03 which meant they were junk come TBO if they even made it to TBO. Then the mechanic proceeded to tell me that the airplane had sat on jacks for over 2 years because the client was unable to pay his bills on the airplane. In one respect I was right... the airplane was not a "book" airplane... it was a project with a nice radio package and a questionable engine. Clearly, the airplane had been grossly misrepresented by someone who has either not seen the airplane or was suffering from a really bad case of myopia.

So I called the broker and asked him a couple of questions. First, I asked him if he had actually seen the airplane. No... but he was told by a "flight instructor how nice it was." Second, had he looked at the logs. No... but he was assured by the seller that everything was perfect. I asked him if he knew the airplane had been on its nose and he said he was told there was no indication in the logs that it had ever been damaged although a quick look at the metalwork near the nose gear showed the aircraft had been extensively repaired. I asked him how he had determined the price of the airplane and he said that the "flight instructor" had given him a figure that was "actually much higher" than the asking price. Finally, I asked him what he felt his professional responsibilities were acting as a broker for this airplane... dead silence.

My experience in this case is sadly all too familiar and it is one of the reasons the aircraft brokerage industry continues to foster its somewhat dubious reputation. The particular broker involved in this transaction is well known within the aviation industry but while I had spoken with him many times over the years, I had never had any professional dealings with him. And while I had no knowledge as to the broker's financial arrangement with the seller, I do know that the seller paid too much and the man had done a terrible disservice to his principal, the airplane and his profession.

Buying and selling an airplane is a complex task with the level of complexity highly dependent on the situation and the type of aircraft being acquired or marketed. For this reason, many people often choose to let a "professional" help them navigate the process and hire a "broker" to act as "agent" for the seller or "principal" in the transaction. But what exactly is "professional representation" and what should you expect from a qualified aircraft broker?

When a seller hires a broker, he or she enters into an agency agreement which is defined as a consensual relationship created by contract or by law where one party, the principal, grants authority for another party, the agent, to act on behalf of and under the control of the principal to deal with a third party. An agency relationship is fiduciary in nature, meaning that there is a fee provided for a service rendered, and the actions and words of an agent exchanged with a third party bind the principal. The importance is that the agent can bind the principal by contract or create liability if he/she causes injury while in the scope of the agency.

The law of agency allows one person (the "Principal" or, in this case, the Seller) to employ another (the Agent or Broker) to do her or his work, sell her or his goods, and acquire property on her or his behalf as if the employer (Seller in this case) were present and acting in person. The principal may authorize the agent to perform a variety of tasks or may restrict the agent to specific functions, but regardless of the amount, or scope, of authority given to the agent, the agent represents the principal and is subject to the principal's control. But most important, the principal is liable for the consequences of acts that the agent has been directed to perform. In other words, while a broker or Seller's agent may alleviate some potential sales liability, he or she cannot eliminate it and in some cases may create additional liability for the Seller.

So what exactly should you expect from an aircraft broker? Here are a list of qualifying questions you should ask when trying to hire a professional to represent you in the sale of an airplane:

What is the broker's experience and knowledge level?
Does the broker have a list of professional references or testimonials from satisfied clients?
Is the broker a member of any professional associations?
Does the broker specialize in any particular airplane and especially yours?
Does the broker have a in-depth understanding of your airplane, its systems and operation?
Is the broker an experienced pilot and does he or she even own an airplane?
Does the broker project a professional appearance and demeanor?
Does the broker understand Section 179 of the tax code?
Does the broker have a suitable website that portrays a professional image?
Will the broker use a professional photographer to photograph your plane or develop a video highlighting its features and benefits?
Will the broker scan and post your logbooks online?
Does the broker have an association with qualified professionals in the ares of aircraft tax, insurance, law, finance, maintenance and training?
Does the broker accurately understand the current market for your aircraft make and model, have access to market data, and invest in services providing this information like Vref, Aircraft Bluebook, JetNet or Amstat?
Will the broker provide you with equalized "comps" on similar aircraft in order to appropriately price your airplane?
Is the broker a certified aircraft appraiser?
Will the broker provide you with a realistic price point for your aircraft even if it's lower than what you might expect?
Can the broker buy your aircraft in the event it does not sell?
Will the broker assist your prospective buyer with ancillary services like cost analysis, completion services, avionics upgrades, maintenance and ferry services, etc. that may help close the sale? If so, are these services included in your brokerage agreement and at what additional charge?
Will the broker develop a professionally prepared marketing package and advertising campaign for your airplane?
Will the broker "stage" your airplane in order to present it at its very best?
Will the broker actually meet the buyer and handle the sale rather than just send you a sales lead and let you fend for yourself?
Can the broker articulate the difference between "listing" and "marketing" your airplane?
If you call the broker, will you get a quick response back? Is the broker accessible on nights and weekends?
Can the broker provide the required legal forms and paperwork internally?
Will the broker use an escrow service in the transaction and if so, how is the fee handled?
Will the broker appropriately inspect your aircraft, do a logbook review, provide a current AD and SB list, perform a title search, perform a flight and systems check, prepare a "squawk list," do a gear swing and perform a compression check all before the aircraft goes to market?
Would you buy an airplane from the broker you are considering?