PLEASE NOTE: These are the major steps put into simplified form. Do not try this at home!
- Make an Offer - Whether informally through email or with a written Letter of Intent.
- Your offer gets countered, or accepted. Buyer and Seller work towards drafting a mutually agreeable Aircraft Purchase Agreement designed specifically to outline everything going forward. During this time but preferably after:
- Buyer may go for a visual-only, inspection. No wrenches, no tools, hands behind the back! Review logbooks for continuity, not content. This should take an hour or two at most.
- Demo / Test Flight- Many Sellers will not allow a test flight at this phase. We do not like to unless an APA is executed.
- Buyer decides to move forward with the purchase or backs away.
- Buyer and Seller execute an agreeable Aircraft Purchase Agreement which outlines the following remaining steps:
- Deposit- Buyer sends the Deposit amount to Escrow.
- Relocation Flight / Test Flight - Seller delivers the plane to the Pre-Buy facility. (This is a GREAT time for the Buyer to perform Test Flight if they haven’t already.) Buyer pays for the plane at a set, hourly rate. Like an all-inclusive lease. Plus pilot airfare, hotel, per diem, if applicable.
- Pre-Buy Inspection - Buyer works with Pre-buy Facility to develop a workscope and Buyer pays (or commits to pay) for the work as defined in their Work Order. That Work Order or a list of the specific tasks to be taken becomes a part of the APA.
- Pre-Buy Inspection begins, and lasts the amount of days allowed per APA; usually 3-4 business days.
- Once the Pre-Buy Inspection finishes, a Discrepancy List is provided to both Buyer and Seller. The Discrepancies are categorized as Airworthy (aka Mandatory), Recommended, or simply cosmetic.
- Seller agrees to fix ONLY Airworthy (aka Mandatory) discrepancies identified. There will be several items of contention here. There always is. The general rule of thumb we use though is that if the Discrepancy would prevent the Pre-Buy facility from signing off the plane for Annual Inspection (or equivalent), it must be completed by the Seller. Believe it or not, the FAA does not strictly define the term “Airworthy” other than that the plane “meets its type design requirements and is in a condition for safe flight.”
- Acceptance or Rejection - Prior to the Seller paying to fix discrepancies, the Buyer must either Accept the Aircraft and make the Deposit non-refundable AND agree to purchase the airplane pending only the rectification of the discrepancies. If you don’t close within the allotted timeframe, the Escrow agent will release your Deposit to the Seller. OR, the Buyer may choose to reject the Aircraft and have its Deposit refunded in full.
- Once the discrepancies are rectified, there is usually 3 business days allowance to close. During this time, Buyer and Seller should work with Escrow to get their FAA Bill of Sale and Application for Registration signed. Also, Buyer gets closing documents signed, and seller coordinates with its lien holders to get lien releases ready to be filed.
- Buyer and / or Buyer’s Bank sends remaining balance of funds to Escrow.
- The plane is relocated to the Closing Location, mutually agreed upon at APA execution. The preference is to close on-site at the maintenance facility to limit risk of loss and having to deal with the logistics, weather and other variables.
- When all closing conditions have been met, Buyer and Seller both instruct the Escrow Agent to close.
- The Escrow agent wires the Lien payoff amount to any Seller lien holders; remaining balance wired to Seller.
- Escrow files FAA Bill of Sale (signed by Seller) and FAA Application for Registration (signed by Buyer) at FAA in-person.
- Ownership has transferred, the deal is CLOSED. Make sure your insurance policy is bound!
Footnote: At some point, you may have realized that buying an aircraft is a complex and complicated process and that you should probably hire a professional. Whether it’s our company or someone else, find someone you can trust to help you navigate the process.
For more information about our Aircraft Acquisition Services, please visit:
(C) 2019 Chase Aviation Company