Bluebook, VREF and Mooney Values

[jgarrison]

  On 10/30/2018 at 2:18 AM, Lance Link said:

No doubt a big part of the value of someone having you sell their plane, or sell one to them, is that you know how to price them.  Private sellers who don't want to pay a broker's fee have to figure that out on their own, without knowing how.  And buyers have to figure out how much to offer and pay without knowing values very well.  No amount of reading ads will give a person solid knowledge in those areas.  I think that because I tried it for a year.  If you sell your knowledge about value, no matter how you do it, I have to think it can only hurt your brokerage business, if only slightly.  You will be giving buyers and sellers the information they need to cut you out of the process.  

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Hmmm. Very good points, all. This post gets my head twirling with ideas...

[jgarrison]

  On 10/30/2018 at 2:09 AM, Yetti said:

What I have never understood is a 75 F and a 78 J.   Generally the F would be 60K and the J would be 110K .    Value wise a F is just a few knots slower but it is half the price.  Most everything else is the same except the speed mods on the J.  3 years in car values would not account for the extra dollars.

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I hear ya... But you are looking at extremes... A better way to look at it would be to compare a 1976 M20F and a 1977 M20J. In Bluebook terms, there is a $12,500 difference between those to models. In theory, you could do some things to make the F nearly equal to the J in speed (Windshield, Cowling). But in the end, the F is still an F and the J is still a J. If you accept that there are year model differences, then give the 77 J $3,000 over 76 F just on year difference alone. That means there is a $9,500 difference strictly due to the model designation. Figure $4,000 value added for a 201 WS and 201 Cowling on the F and the difference in value, all things being equal otherwise, would be $5,500. That would be your true difference between J and a well modified F. $9,500 would be the difference for J vs. Stock F. There is nothing that you can ever do to not tie the '76F to the executive line that started in '67. So it will always be considered an 'older' model or as we in the Mooney world put it 'Pre-201'. For buyers, this is the kind of information that helps them make informed decisions. 

[jgarrison]

  On 10/30/2018 at 4:00 AM, Andy95W said:

Then, instead of giving free advice, offer your services for some reasonable amount to evaluate a specific airplane.  I don't know, maybe $20-50 or so?  The potential buyer would send you all of the specs you require and you would evaluate the airplane.  Or, for a seller, he could advertise his airplane (with your agreement) as "Aircraft value determined by Jimmy Garrison".

At least this way you're not providing a guide of every possible combination of models, times and equipment, but you could use your experience to focus in on one airplane at a time, just like you do with All American.  Might get some new customers for them this way, as well.

Good luck, we really do value what you do for our community.

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Thanks for the kind words. I like your ideas. I can see some problems with the specific valuation method. Primarily, that I will have to stop and plug in specs on every plane that requests and if I am flying or not available and cant respond in a timely manner, that plane could very well be sold to another party while my customer is waiting for the evaluation. I definitely think it would be better to provide a value guide to a person and then let them plug the numbers in themselves.

[jgarrison]

  On 10/30/2018 at 4:17 AM, Bob_Belville said:

A thought... I wonder if you have or can cultivate relationships with a aircraft lender or two who would give proper weight to your valuation criteria. Would having a good opportunity to get a crack at those 50 sales a year you're doing peak their interest? 

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Excellent, Excellent Idea... Thanks, Bob. 

[jgarrison]

  On 10/30/2018 at 4:35 AM, smccray said:

I want to challenge you a bit Jimmy on the definition of the problem.  You're stating that the problem is that banks/buyers don't understand the values of various upgrades to certain aircraft.  You have two different groups there that you have to think about differently.

Buyers:  Pilots are cheap.  Mooney pilots are extra cheap.  I believe your current business is capturing your knowledge.

Banks: The solution already exists, but your definition of the problem isn't correct.  If your number is good, all it takes is ordering a full appraisal on the plane.  The bank just needs something to stick in a file that proves that the loan is secure.  The desktop appraisals tools are a way to avoid the cost of a full appraisal.  If the Bank is willing, all it takes is to have the Bank order an appraisal of the plane.  It doesn't make much sense on a low value loan, and that's the real rub.

 

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You just touched on another nerve of mine... Appraisals. I get appraisals on my desk every once in a while. An owner will have an appraisal performed by some 'certified' aircraft appraiser in the past. They decide they want to sell the plane so they send me that appraisal to use for valuing the plane. And they are always, always way off the actual market. The presentation is awesome. The bottom line is terrible. And almost always on the high side. And the reason is, same as we have discussed previous here - there is no meaningful database of actual sales with which to draw from. A real estate appraiser has actual sales data to compare to. A car appraiser has a vast database of sales. The aircraft appraiser has limited data and is using some combination of a scan of the market (which can be way off if he doesn't know the make/model intimately) and some preset value bases that he pulls out of a guide (same problem as the big guides, where is the data coming from). I would love for banks to order full appraisals. Based on past appraisals, that would mean a sale due to the inflated values that come from the professional appraisers. I have and still do value assessments for individuals, insurance companies, lawyers, etc... But I make it 100% clear that what I am giving them is an assessment of value based on my position in the market and recent sales that I have either done or that I know of. There is no such thing as a true appraisal of an aircraft.

[jgarrison]

  On 10/30/2018 at 4:48 AM, carusoam said:

Jimmy, see if any of this makes sense related to your questions...

While selling industrial machinery, I saw many of the same challenges...

 

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Excellent Post!! This one I need to cogitate on for a while. Thanks, Anthony

[jgarrison]

  On 10/30/2018 at 5:12 AM, KSMooniac said:

Even if you published Jimmy's Mooney Guide periodically, do you think a random bank would place more stock in that over VREF? I don't...hence my belief that you could cultivate a handful of lenders that have confidence in your knowledge of the market and it would be a win-win-win for all parties.
 

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Even if the lenders would apply value properly to VREF and BB, I would be happy. As I mentioned, the two appraisals I ran through BB and VREF, when ALL the assets of the plane were considered would have averaged out to a price higher than we would have likely contracted for. 

Here is a question. You are a buyer. Two identical planes are on the market.  One has a Garmin 430W in it. One does not have a GPS, just a King Nav/Com for the #1. Let's call it a pre-201 because of value considerations (it is easier to value the real difference of a 430W in a 1965 M20C than a 1999 M20M Bravo). What value do you give the one with the 430W?

Even Better question. Same plane. One has an STEC-50 or STEC-30 autopilot. What is the value of the one over the other?

[jgarrison]

  On 10/30/2018 at 5:43 AM, Skates97 said:

In every case it was because the Sales Manager or Finance manager called in a favor with a bank or credit union branch president that they had developed a professional relationship with.

I think with your track record/history you could have (or may already have) a couple of contacts that you could lean on a little to get some of those contracts bought. 

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I have probably referred / financed 30-40 planes with this guy. I used him in the past because of his rates and his underwriting ease. Then he got burned by some broker who sold a plane that didn't exist (or at least the plane wasn't what was financed). His underwriting and documentation has become unwieldy. I have mostly stopped referring him a lot because of the difficulty of process now. I screwed up on this one and referred him. I won't make the mistake again. But I do need to cultivate a new relationship and have a go to. Thanks for the words.

[KSMooniac]

Ah, I didn't realize or misunderstood that the BB and VREF numbers would have supported your sale price if they were properly applied. I thought those tools under-predicted the current value. That changes my idea a bit... Perhaps a single manifesto outlining all of the value-adds for the Mooney fleet could help ignorant lenders apply the existing tools?

Regarding your scenarios, I would value an existing 430W in a pre-J Mooney at +$6000...roughly half the installed new cost for an IFD 440 or a GTN 650. Maybe a touch more knowing I can slide an IFD in there if I wanted the latest.

The STEC is a slightly different debate. It is certainly better than nothing or just a PC system. But we have the GFC500 coming very soon and at modest cost. A year ago the STEC might've been a +$10000 add (assuming GPSS and alt hold) but today I'd call it $5000. I say that as an STEC-30 owner that plans to replace it with the Garmin or perhaps Dynon.

I hope that helps.

Sent from my LG-US996 using Tapatalk

[jgarrison]

  On 10/30/2018 at 4:40 AM, smccray said:

It won't work.  The appraisal has to be independent, and a broker in the deal isn't an independent party.  The bank's assessment of the collateral is irrelevant- the bank regulators will be looking for an independent assessment of the value of the collateral.

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I understand regulators and the paper trail. But even if the lender would make Bluebook or VREF appraisals that included the actual appraisal points instead of just checking the boxes... Perhaps there is a lender out there who can comprehend that it is impossible to value a plane based on the guides and would accept some data points from real world. That is the guy I am looking for. 

[jgarrison]

  On 10/30/2018 at 12:34 PM, smccray said:

Van Bortel finances aircraft using an in house finance department. I don’t know how low they go in terms of loan size, but they may be a source for financing.  A non-bank lender is probably the best bet to get a deal done, and their rates (at least 2 years ago when I asked) were bank/like.  They were willing to finance a plane they didn’t sell, but I asked about a Meridian for a friend, not a Mooney.

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Thanks. Good info.

[jgarrison]

  On 10/30/2018 at 3:12 PM, rpcc said:

Well - from a buyers point of view IMHO, I think a Mooney value guide is about as useful a concept as  a Future wife value guide.  These are not Hershee bars.  From what I've learned, these machines are each unique - from equipment, condition, operational history, and time to make whatever changes are needed - electronics upgrades, paint, tanks....  and to be quite honest how the machine works with the owners objectives and how attractive the complete package is to the buyer.   Agreed it does drive the financing market and in a sense help support the value.  

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Actually, you have supported my position with the description as unique. Yes, every plane is unique. That is why when you take an M20C and try to impute value into it in the same way that you put value into a Cessna 172, you get wrong value info. When I wrote the MAPA column, I did get a lot of calls from people. Mostly sellers. Asking me about things on their plane that they didn't see in my column. And granted, I can't mention every small detail in anything I produce. But there are standards in the Mooney line that are different from every other make of aircraft. A guide will not substitute for a prebuy or logbook research. I have every plane's logs scanned and complete and in very presentable order (you can't imagine how haphazard logs scans are by some people) and I recommend every buyer get a prebuy. Those are two things that affirm the uniqueness of the plane. But on the value side for installed equipment, you can't substitute for a comprehensive guide that takes buyers desires into account.

[bill98]

Thanks for the Mooney back in July Jimmy!

 

One thing banks do not understand either regarding the sale price is other incentives (such as getting the hangar the aircraft was in prior to you buying). The difference between getting something such as the rental slot for the hangar can mean the difference between hail damage or flying the aircraft the next day and pulling it out of the hangar. Something like a hangar also then means cheaper insurance.

Could I have tried to haggle on my purchase? Possibly. But being able to keep the aircraft in the hangar it was already sitting in and having to do ZERO research on finding the plane a place to stay was worth a few K in my opinion. Plus it just so happens the hangar is among the cheapest rates in the area.

 

You could make master guide - update it once or twice a year. New avionics do not come out every month that are game changers. New ones might come out once a year so overall the value shouldn't fluctuate that much through out the year.

Only exception to this would be on Cessna 172/182 since having a complex AC is no longer required for the commercial checkride. 

[jgarrison]

  On 10/30/2018 at 4:44 PM, KSMooniac said:

Ah, I didn't realize or misunderstood that the BB and VREF numbers would have supported your sale price if they were properly applied. I thought those tools under-predicted the current value. That changes my idea a bit... Perhaps a single manifesto outlining all of the value-adds for the Mooney fleet could help ignorant lenders apply the existing tools?

Regarding your scenarios, I would value an existing 430W in a pre-J Mooney at +$6000...roughly half the installed new cost for an IFD 440 or a GTN 650. Maybe a touch more knowing I can slide an IFD in there if I wanted the latest.

The STEC is a slightly different debate. It is certainly better than nothing or just a PC system. But we have the GFC500 coming very soon and at modest cost. A year ago the STEC might've been a +$10000 add (assuming GPSS and alt hold) but today I'd call it $5000. I say that as an STEC-30 owner that plans to replace it with the Garmin or perhaps Dynon.

I hope that helps.

Sent from my LG-US996 using Tapatalk
 

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Correct. I presented him with correct VREF and BB valuations. He basically told me I didn't know what I was talking about. 

Hooray!!!! First answer is right on the button. Lender told me point blank that a 430W was worth $2,400. He told me no-one wanted them any more. He told me that the 650 was the radio people wanted. He told me you couldn't even sell a 430W on the used market. Neither BB or VREF provide values on a 430W. It is up to the appraiser to determine value on that unit.

On the Autopilot, agreed. Times are about to change there. Here are the additions in VREF and BB for the referenced autopilots:

VREF - STEC-30:  $10,900

VERF - STEC-50: $4,000

BB - 'Two Axis AP': $400 (yes, there is no comma in that number)

[KSMooniac]

Wow, that is really bad.

A used 430W kit will sell in one day for $6000 right now. It adds that much to an old plane...maybe more for the savvy buyer that already can use it well. Too bad your lender doesn't understand that. The newer GPS boxes can't take the plane to any additional airports or lower minimums than the trusty 430W...

Sent from my LG-US996 using Tapatalk

[smccray]

  On 10/30/2018 at 5:01 PM, jgarrison said:

 I understand regulators and the paper trail. But even if the lender would make Bluebook or VREF appraisals that included the actual appraisal points instead of just checking the boxes... Perhaps there is a lender out there who can comprehend that it is impossible to value a plane based on the guides and would accept some data points from real world. That is the guy I am looking for. 

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Even if the lender understands that's not the issue.  No doubt you were dealing with a lender that wasn't doing his homework on the GNS430w, but honestly that doesn't matter.  Even if you find a lender at a bank who understands aviation, even a senior lender that happens to love vintage Mooneys, you will still run into these problems.  It's a paperwork issue for the bank to prove to the regulators that the loan is secure.  The only solution here is to provide some other sort of independent value estimate.  In addition, it may be as simple as the lender believes that the value of GNS navigators is going to tank over some timeframe and he isn't willing to give the collateral much value even if the market values the navigator higher than the lender.  Its an investment for the bank and that difference of opinion.

There's a real truth here that is tough to talk about- very few lenders actually want a $50K loan on an airplane.  There just isn't enough margin in the loan after accounting for origination costs and the risk associated with the deal.  It's the same work to underwrite a new cirrus as it is to underwrite a C model Mooney.  In reality, the Cirrus is easier because there's a liquid market for Cirrus aircraft.

A few thoughts on finding a lender:

• One lender who is open to lending on aircraft anywhere in the country is going to be difficult.  You want a lender who is interested in building a portfolio of aircraft loans and is willing to lend on lower value aircraft.  C models are probably out, but the if you start looking 252s or higher you're more likely to have some luck.  That's the nice part of non-bank lenders- they're not required to prove the value to a federal regulator.
• If you're looking at a highly modified airplane with poorly understood valuable upgrades, be prepared for a cash buyer.  The lender may not understand the collateral, but in reality the lender may not want to go into a loan committee meeting and try to explain the wide variance of the value to a loan committee. I understand Mooneys, and we used to own the bank- and I wouldn't do it.  It's not worth the trouble on a $50-$75K loan @ 5%.  
• Instead of lenders, connect with the relationship managers at regional banks.  National banks want large loans- anything less than $1M is a waste of their time.  The regionals can profitably make lower $ amount loans.  The relationship manager rather than the lender because, and this is key, the value to the bank has to be understood as more than the aircraft loan.  The airplane loan opens the door to building a relationship with a likely high income borrower.  Many airplane buyers could easily qualify for the loan based solely on their signature independent of the collateral.  The relationship managers are more likely to understand the value of the customer, rather than the lenders focus on the value of the loan.

Lenders make stupid decisions all the time.  They underwrite loans that they shouldn't, and the say, "no" to very high quality credit risks due to some misunderstanding.  There are structural problems with lending at low levels that will eventually be addressed at some point if there's enough profit there; perhaps that's the real issue.  60% Loan to Value @ 10%- you can get that deal done.  80%+ LTV at 5% on a $75K airplane?  And you want a 15-20 year term?  Nope. 

[Oldguy]

One thing I don't see on VREF or BB is a cost/value for missing logs. Or the value of an annual at a MSC versus a non-Mooney experienced shop versus a "pencil-whipped" annual. 

I think Jimmy's knowledge and ability to read between the lines of the logs, as well as read the seller, would be a more valuable and unique resource I would find hard to see as being able to be written down. But I would be willing to pay for that knowledge as both a seller and a buyer.

[DonMuncy]

  On 10/30/2018 at 2:18 AM, Lance Link said:

 If you sell your knowledge about value, no matter how you do it, I have to think it can only hurt your brokerage business, if only slightly.  You will be giving buyers and sellers the information they need to cut you out of the process.  

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Lance,

I think you are right to an extent. Yes he is hurting his business a little. But I think he more than makes up for it in credibility. I think this is shown by his business. My guess would be that Jimmy and David are the largest volume Mooney broker in the country. 

 

[Mooneymite]

The solution to this issue is simple:  Call my local taxing authority.  She has no problem whatsoever placing a value on my plane without knowing a thing about it.  She is also willing to defend that valuation in front of a board composed of her peers, so it must be valid.  

[jgarrison]

  On 10/30/2018 at 6:45 PM, Mooneymite said:

The solution to this issue is simple:  Call my local taxing authority.  She has no problem whatsoever placing a value on my plane without knowing a thing about it.  She is also willing to defend that valuation in front of a board composed of her peers, so it must be valid.  

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Name and phone number please?

[jaylw314]

  On 10/30/2018 at 6:45 PM, Mooneymite said:

The solution to this issue is simple:  Call my local taxing authority.  She has no problem whatsoever placing a value on my plane without knowing a thing about it.  She is also willing to defend that valuation in front of a board composed of her peers, so it must be valid.  

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If they're anything like the local tax assessors who assess the value of my house for property tax despite the actual cost of the house, the banks don't care what they have to say and vice versa

[rpcc]

  On 10/30/2018 at 5:12 PM, jgarrison said:

Actually, you have supported my position with the description as unique. Yes, every plane is unique. That is why when you take an M20C and try to impute value into it in the same way that you put value into a Cessna 172, you get wrong value info. When I wrote the MAPA column, I did get a lot of calls from people. Mostly sellers. Asking me about things on their plane that they didn't see in my column. And granted, I can't mention every small detail in anything I produce. But there are standards in the Mooney line that are different from every other make of aircraft. A guide will not substitute for a prebuy or logbook research. I have every plane's logs scanned and complete and in very presentable order (you can't imagine how haphazard logs scans are by some people) and I recommend every buyer get a prebuy. Those are two things that affirm the uniqueness of the plane. But on the value side for installed equipment, you can't substitute for a comprehensive guide that takes buyers desires into account.

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Well your position is to produce a guide correct?  When there are many things of like type and configuration trading frequently a guide makes sense.  Trying to apply this strategy to an incredibly small market makes no sense at all - IMHO.  Too little pricing data available and too few sales to have any confidence in the value.  

In addition it takes a willing buyer and willing seller to make a transaction happen - many things on both sides of the deal come into play for these one off sales.  Life events for example - loss of medical... may make a seller more willing to trade out of the plane at a lower price than a actively flying pilot who is looking for the new wip.  

If you want a great estimate of value - throw it on ebay - that will tell you what buyers are willing to pay for that airframe and configuration.  

Good luck.

 

Edited October 30, 2018 by rpcc

[LANCECASPER]

  On 10/30/2018 at 7:17 PM, rpcc said:

If you want a great estimate of value - throw it on ebay - that will tell you what buyers are willing to pay for that airframe and configuration.  

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In theory maybe, but not so much in reality.

On one hand, shill bidding still takes place on Ebay where friends and family and alias names bid on the item trying to get the value up there. You never really know if those bids are "real". 

On the other hand, many people's perceived value of an airplane on Ebay is low since they think there's something inherently wrong with it. ("Why would they put it on Ebay and not Controller or Trade-a-Plane?")

 

[jgarrison]

  On 10/30/2018 at 7:25 PM, LANCECASPER said:

In theory maybe, but not so much in reality.

On one hand, shill bidding still takes place on Ebay where friends and family and alias names bid on the item trying to get the value up there. You never really know if those bids are "real". 

On the other hand, many people's perceived value of an airplane on Ebay is low since they think there's something inherently wrong with it. ("Why would they put it on Ebay and not Controller or Trade-a-Plane?")

 

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Bingo. You want to sell for wholesale or below, ebay is the way to go. You cannot gauge value by watching any aircraft on ebay. Thanks, Lance

Responding to the previous poster... My position is not necessarily to produce a guide. My position is that there are two guides widely referenced now that don't know a flip about the actual market. And my potential solution is to produce a guide that, at a minimum, will apply value where value exists. Same thing goes for value detractors. There are quite a few of those. So if there is going to be a guide, should we use a guide that is flawed and produced by someone who has never sold an aircraft in their life or one that is produced by someone who actually talks to many hundreds of real buyers every year? My position is that there is a better way.

When I wrote the MAPA piece, I believe I did a fairly good job of explaining how to value a plane. I know there is one internet valuator out there now that is basically an offshoot, or more accurately, it uses a template that resembles the work I did back then. I think the members here who read my work back then will attest that my values were pretty close and I have been referenced here many times regarding value. So yes, there is a formula that can be used if that person or entity actually has first hand knowledge of what he or it knows something about the actual market. And absolutely, there are circumstances that don't hold up to the formula. If a man or woman wants to sell for below market because of a situation, then more power to the buyer who gets a deal. But that outlier does not change the true value of the aircraft. I just means that a fair transaction was done at below market value and someone got a deal.

[jgarrison]

  On 10/30/2018 at 6:41 PM, DonMuncy said:

Jimmy and David are the largest volume Mooney broker in the country. 

 

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I don't know by what metric we can measure this, but I can tell you that I would bet we sell more Mooneys from top end to bottom end than anyone else. Last I checked, the other big names were fairly limited in their choice of inventory. When Shery called it quits, the vintage Mooney market lost one of its biggest cheerleaders. We continue to sell the older stuff even though it is harder to sell and the return is less than selling the newer stuff.