Tip 27 – Getting Ready to Sell – Part I
By: Jerry Temple
Phone: (972) 712-7302 Fax: (972) 712-7303
If you are getting ready to sell your airplane outright or pursuing a trade scenario with an aircraft dealer, the following is a discussion of some of the steps and actions a wise owner/seller addresses.
Let’s start with the Owner ordering a Title Search. I know you’re positive that you own the aircraft outright. You paid cash for it. No loan. I estimate that twenty percent of the aircraft JTA agrees to represent or is researching for Buyers have some type of title problem. These problems create a “clouded title” and no wise Buyer will pay cash for an airplane with a clouded title. In addition, no Lender will fund a loan on an aircraft with a clouded title. The most common problem is fairly simple, but time-consuming to correct. This is where a previous loan was paid off, but no Lien Release was submitted to the FAA. Banks, especially those that are not active in aircraft loans, are quite efficient in filing a Lien with the FAA when loaning money for an aircraft purchase, however they are inefficient in submitting to the FAA a Lien Release when that loan has been paid off. Preventing this from occurring is, alone, worth the entire cost of using an Escrow Agent to administer the payoff of an aircraft. The Escrow Agent secures a signed Lien Release from the Lien Holder (the bank with a loan on the aircraft), pays the bank the exact payoff amount and then is able to provide the Purchaser with a clear title. Therefore, when you, an Owner/Seller, order a Title Search, or when a Buyer for your aircraft or the Buyer’s Lender orders a Title Search, there will not be a long-ago-paid-off loan still reflected on the aircraft.
Obtaining a Lien Release for this old paid-off loan can be both time-consuming and challenging. The Title Search may show where a loan has been assigned (sold) to one or more other lenders. However, even if I keep this example simple, it may not reflect a simple solution. Calling Directory Assistance may get you a “no listing for Bank ABC”. Why? Bank ABC merged with Bank DEF several years ago and then changed its name to Bank 123, which later was taken over by Bank XYZ. So you, the Owner who thought he had a clear title, or perhaps your Broker or a potential Buyer or the Buyer’s Broker or an Escrow Agent, must now play detective to track down the entity that has possession of the old loan records. It often is less than easy to explain to a young bank officer that you’re wishing to send him/her an FAA Lien Release Form for an original signature for a loan that was perhaps paid off before that loan officer was even born! If nothing else, the records will not be easily accessible. Often, the Purchaser’s Lender will further complicate the process by insisting on legal documentation of bank name changes and mergers, thus proving that the entity now issuing a Lien Release is, indeed, the correct authority.
Other reasons for a Seller to order a Title Search is the fact that liens and “other actions” can be filed with the FAA against your aircraft. The FAA does not notify an Owner of any “paperwork action” against his/her airplane. An example is a Mechanics Lien. If you’ve had a payment dispute with a maintenance or avionics shop, they have the legal right to file a lien. Additionally, the FAA’s rules on who can file a lien are vague. If you’d had a dispute with other persons or firms for services that involved your aircraft, a lien can be filed. Even if you disagree and dispute the lien, it will likely still cloud the title and here again, no wise Buyer will move forward nor will a Lender fund on this aircraft. It’s pretty rare that a shop, aircraft broker or consultant simply files a made-up “phony” lien. In most cases, there’s a legitimate cause. Now may be a good time to try to resolve the problem. It may not be worth losing a strong sale.
Yet another reason for ordering a Title Search is to uncover a rare illegal action. One Arizona customer recently contracted with JTA to sell his Cessna 414. JTA was told by the owner that there was no loan on the aircraft. “Owned free and clear. Paid cash.” However, the Title Search that JTA orders on all new listings revealed a “Security Agreement” between the previous Owner, a Fort Collins, Colorado construction firm Owner and an individual in Orlando, FL. The Fort Collins individual used his then-owned 414 as collateral. However, the Orlando Lender never filed any paperwork with the FAA. None. When selling the 414, the Fort Collins Owner failed to disclose the loan with the aircraft as collateral. The Arizona Buyer, through a major aircraft lender ordered a Title Search, which showed no lien. The purchase was made with the new Arizona Owner now having a normal loan with a major aircraft lender. When the Fort Collins borrower didn’t repay a loan, suddenly a Security Agreement was sent to the FAA. It was placed into the aircraft’s file and clouded the title. When JTA informed the Arizona Owner of the problem, he was of course shocked as was the legal dept. of a major aircraft lender. However, this Lender simply took the position that the Arizona owner had executed a valid loan and payments were still due. Further, it’s the Arizona Owner’s responsibility to solve the problem. With a clouded title and no timetable when the problem would be resolved, JTA had to cancel the listing on an aircraft that more than likely would have been sold, producing a pleased Buyer and Seller.
When the Arizona Owner’s attorney could not get any response from the Orlando Lender, a lawsuit was filed. This wrong will eventually be righted, but in the meantime, no sale can be made and the Owner will likely have to spend several thousand dollars to get the lien removed by a judge’s order. In addition to obtaining a Title Search, JTA urges all Owners/Sellers to also order a Chain of Title Report. This report shows every person, partnership, firm, etc. that the aircraft has ever been registered to. Hopefully, the current Owner actually has the Chain of Title Report from when the aircraft was being purchased. It was then that the research as to where this aircraft has lived, would have been learned. Nevertheless, a Chain of Title, if not previously obtained, is of value. Questions about the aircraft’s past home bases can be answered and a comprehensive logbook review is easier when knowing the dates of ownership changes and locations.
When ordering a Title Search and Chain of Title, it’s a good idea to order a copy of every FAA Form 337 -“Major Repair and Alteration”- on file. Though all 337’s should be a part of an Owner’s aircraft records, often a 337 referred to in the logbooks gets lost. Obtaining a set allows an Owner to confirm all 337’s on file with the FAA are present in the records a Buyer will review.
Even if all 337’s are present, this extra set can become a part of a photocopy version of all logbooks and records, if this “clone” has not been previously made by the current Owner or a previous Owner.
Any of the aircraft Title/Escrow firms offer Title Searches, Chain of Title and copies of 337’s on file with the FAA. For approximately $100, you can obtain a Title Search, Chain of Title and copies of all 337’s on file.
Next, let’s go visit the airplane. Remember to use the acronym “ARROW”:
A – Air Worthiness Registration
R – Registration
R – Radio License (FCC Permit – now only need for Int’l Op.)
O – Owner’s Manual or Pilot’s Operating Handbook (POH)
W – Weight & Balance
First, take a look at the Airworthiness Certificate. Read it. Is it correct? Often aircraft have had “N” number changes, but no one bothered to get a new Airworthiness Certificate. What’s it’s condition? If it is ragged, get a replacement. Just take the Airworthiness Certificate and your Registration to the FAA FSDO office and get a replacement. Next, if you’re a pack rat and can’t throw anything away, pay attention. If you’re carrying the old pink temporary registration, (or perhaps even two or three old pink temporary registrations) throw them away. Toss ‘em. All you need is the one current 3”x 5” white registration.
Next, check the Owner’s Manual or Pilot’s Operating Handbook. Is it for your year model aircraft? JTA often sees the wrong year manual in an airplane.
Then locate the required on-board Weight and Balance form. It may be in the Weight and Balance Section of the Pilot’s Operating Handbook (POH) or kept elsewhere. JTA recommends a copy in the Owner’s Manual or POH and a separate copy in a separate 3-ring binder where all of the Flight Manual Supplements are kept. Make certain the Weight and Balance in the airplane is, indeed, the most current copy. Often, JTA will see in a logbook entry or on a Form 337 that avionics or equipment has been added, deleted, exchanged and that a Weight and Balance Form was completed, yet the form in the aircraft is an older previous calculation. Often, the correct form is still attached to a paid invoice or just a loose piece of paper in a big box or bag of records. Remember current Weight and Balance. Often, an Owner will need to call an avionics shop and track down a missing Form 337, logbook entry or Weight and Balance Form.
Next, let’s do some inventory work. For the modifications, equipment and avionics that have been added to the aircraft that have a Supplemental Type Certificate (STC) and require a Pilot’s Operating Handbook Supplement, are they all present? JTA recommends these be kept in a separate 3-ring binder. Examples of required POH Supplements are: Vortex Generators, Robertson STOL System, Spoilers, AA Intercoolers, RAM Conversions, Keith (JB) Air, Rosen Sun Visors (go figure!), various engine analyzers/monitors, various autopilots, etc. JTA often finds required on-board supplements in logbook bags/boxes, envelopes with receipts, etc. These supplements become a part of the Owner’s Manual/POH.
While we’re inventorying for Equipment Flight Manual Supplements, make certain you have all of the Equipment Manuals. These go with the airplane sale. Just look at the panel. Note the avionics and other instruments/gauges. Examples are Garmin 530, 430, UPS/Upsat Avionics, King, Collins and NARCO Avionics. Radar, Stormscope and Strikefinder Manuals. Operator Handbooks for Graphic Engine Monitors, Multi-Function Displays (MFD) like the Apollo MX20.
The statement that they never came with the aircraft does not hold up. The Owner/Operator should have acquired them if they were not present when purchasing the aircraft. These can be obtained from manufacturers, off the internet, ebay and often just by photocopying from a borrowed manual.
Though not a document or manual, while we’re with the aircraft, let’s count the oxygen masks if it’s a pressurized twin Cessna. How many present? Do they work? Are they as brittle as Corn Flakes? Are they usable? Oxygen masks are not a part of the sale inasmuch as it is the oxygen system that is listed on a Spec List, but a good mask will be needed for a Buyer’s Evaluation Flight.
Last in the discussion of paperwork and documents are the most critical and valuable item(s) – the aircraft’s logbook and other records. In previous articles over the past ten years, JTA has “preached” the critical importance of maintaining a photocopy set of all logbooks and records. If an Owner has made this clone or received it from a previous Owner, then one only needs to be certain it is current when preparing to sell the aircraft. If no logbook copy set exists, then such a copy set should be made. It is an important “insurance document” for any Owner and an excellent sales tool when selling the aircraft. Always assume the Buyer is far away, not nearby. Travel to see an aircraft is expensive, but more than money, is the value of the Buyer’s time. Traveling a long way, only to learn of a problem a few minutes into reviewing the logbooks, is not appreciated by any Buyer. The ability to loan a Buyer the logbook photocopy set can often be the action that gets the Seller an offer. A Buyer and/or his mechanic, can review maintenance, repairs, review AD and Service Bulletin compliance before an expensive trip is made. Also, any problem issues can often be resolved before any Buyer travels or aircraft movements are made.
JTA creates a comprehensive “clone” of all aircraft it represents and provides this photocopy set to an aircraft’s new Owner with the admonition to keep the copy set current. A Seller needs to make certain all of the logbooks are together and current. Have any shop that owes you an entry complete it and add it to the appropriate logbook. JTA often discovers old, but pertinent logs kept in one place and current logs kept in another location. Often, when converting to the RAM/Adlog 8 1/2” x 11” logbook format, the small logbooks get misplaced. All available logbooks and records need to be available for a Buyer’s review. Round them up.
So when it’s time to sell or trade, check out the home attic, basement and garage. Check the office and hangar. Look through the aircraft’s logbook bag and box. Open envelopes – see what’s hiding in there. If you’ve never before carefully read – as in s-l-o-w-l-y, your aircraft’s logbooks and records, now would be a good time to do so. Your investment in preparation may help you to sell your aircraft faster and at a better price. For the Owner who does not have the time or desire to invest in much of the preparation needed to successfully sell a twin Cessna, then there are professionals who do it for a living.