Deposit on Plane

[Vagus]

Hey everyone,

I am looking to buy a plane and most companies or individuals want a deposit of 500 to 1000. One company is asking for 5000 on all their planes 40k to 70k. Obviously getting it back if issues are found during the pre buy. Is this normal to ask for this amount of money? Any horroe stories? Tips? 

Appreciate everyones insight, 

James

[steingar]

If its what they want it doesn't really matter what anyone else does.  Just get a good contract so if things go south you can get your money back out.  A buddy is selling his Echo, Went to pre buy, he offered to fix what few squawks there were, but the buyer still got cold feet.

Edited December 7, 2018 by steingar

[smccray]

Place the deposit into escrow.  If that doesn't make the seller comfortable then move on.  $500 is crazy- If I were the seller I would be looking for $5000.  It's not about the value of the plane, but the representations you're making as a buyer.  

[Hank]

Use an ewcrow service. They'll handle the deposit and the final payment.

[gsxrpilot]

$5000 is about standard for a plane of that value. You'd be surprised how many buyers want to go through all the motions and then can't actually afford to buy the plane. That can be costly for the seller.

Also, the ability to put your hands on $5K at a moments notice is pretty much a requirement to play in this game.

[carusoam]

At least....

Write a purchasing agreement that details what payments are being made, what you get for that, and what happens to that money when things fall apart....

I probably wrote a list of 10) things I was expecting when I bought or sold my plane...

That is ten details that are hard to exactly remember for both the buyer and seller... a few days later.  Even when things are going smashingly well....

There is very little ‘normal’ or ‘expected’ when buying used machines...

PPI, AW issues, non-AW issues, what fails the PPI, how to walk away when things go south...

For me...

• price
• What’s included (sales ad for the plane)
• earnest money to go with the purchase agreement (intention to buy, Getting first right to buy, block out other buyers while you are in the process of buying, time line to complete sale)
• down payment (initiates the sales process, both the buyer and the seller are interested in closing the process)
• PPI (who, what, where, when)
• Failed PPI for AW issues... (fix or end sale)
• Failed PPI for non AW issues... important things not working. (Fix or get price adjustment)
• Transition Training
• how much fuel is in the tanks, head sets, portable devices. (Things That May get removed, if you are expecting they are staying)
• Who pays for moving the plane around, who is going to fly the plane if required...
• Insurance coverage while this is all going on...

Often, buying from a professional sales organization, things end up as expected... when buying from individuals with no experience in planes or sales, things can go sideways...

My first plane purchase was from an individual.... the plane was bent from repeated hard landings... rivets were falling out of it... bondo was falling off of the wing... The PPI ended before the plane went into the shop....

getting the down payment back required a small claims suit.  Months lost before getting back on track...

 

Use the collective MS ideas to determine what is right for your situation... do you formalize the process with a written document?  Do you use a lawyer? Does your seller agree with your hand written notes? A hand shake is often good, memories are often not so good... write everything down...

Expect everything to take longer than expected... your PPI shop schedule may be full up....

Private Pilot thoughts only, not a legal expert, not legal advice... just stuff I did in the past that may not apply to anybody else in the future...

Best regards,

-a-

[gsxrpilot]

16 minutes ago, carusoam said:

getting the down payment back required a small claims suit.  Months lost before getting back on track...

Good advice as always Anthony @carusoam. It might have been mentioned a few times here that "pre-buying" the seller is as important as the plane. And for lots of reasons, not just for this type of trouble.

[GDGR]

10% of the cost of the plane is standard. I put $5k down on my prior to a prebuy. 

[Jerry 5TJ]

Even if you plan to pay cash it can be smart to get financing, especially for a first time buyer.  

A lender will make sure title is clear and purchase agreement requirements are all complete before release of funds.   

Aviation loans generally have no prepayment penalty. 

[GDGR]

Just now, Jerry 5TJ said:

Even if you plan to pay cash it can be smart to get financing, especially for a first time buyer.  

A lender will make sure title is clear and purchase agreement requirements are all complete before release of funds.   

Aviation loans generally have no prepayment penalty. 

Great call on that! I learned (through thorough research) that this was the case. It extended the process considerably on a couple of fronts. One was a lien on the plane, due to a third partners divorce, and owing money to his ex. 
Second part was said third partner refusing to sign the Bill of Sale, until he got his cut of the sale, even though what he owed in his share of hangar fees, maintenance, insurance, etc. was more than his share. 
All was sorted out in the end, but it was a royal pain to get sorted. 

[gsxrpilot]

If there are big ticket items on the airplane such as sophisticated avionics, autopilot, TKS, air-conditioning, etc. it might be good to call them out in any purchase agreement with the seller certifying that they work properly and are in good repair. These things might not be "airworthy" items, but if discovered not to be working properly, or in the process of failing, during the pre-buy, I'd want to be able to back out of the deal. Typically only airworthy issues allow the buyer to walk without any penalty. Of course from the buyers side, just represent your airplane honestly. 

There's been some really good advice offered here before and that is to evaluate your airplane as a buyer. Would you buy it and if so for how much, knowing everything you do about it. Those sellers sell quick and easily.

[Vagus]

Hmm all these comments are invaluable. I appreciate the loan advice. Only issue with the loan is there are additional fees you have to pay to the loan company. I can do a title search myself and see if there are leins through AOPA. 

[gsxrpilot]

1 minute ago, James0519 said:

Hmm all these comments are invaluable. I appreciate the loan advice. Only issue with the loan is there are additional fees you have to pay to the loan company. I can do a title search myself and see if there are leins through AOPA. 

You are correct. While it's good advice to get the loan, you can mitigate the risk yourself with proper due diligence. I didn't do loans on either airplane I've owned.

[smccray]

11 hours ago, gsxrpilot said:

If there are big ticket items on the airplane such as sophisticated avionics, autopilot, TKS, air-conditioning, etc. it might be good to call them out in any purchase agreement with the seller certifying that they work properly and are in good repair. These things might not be "airworthy" items, but if discovered not to be working properly, or in the process of failing, during the pre-buy, I'd want to be able to back out of the deal. Typically only airworthy issues allow the buyer to walk without any penalty. Of course from the buyers side, just represent your airplane honestly. 

There's been some really good advice offered here before and that is to evaluate your airplane as a buyer. Would you buy it and if so for how much, knowing everything you do about it. Those sellers sell quick and easily.

On my latest purchase I wrote the contract such that I could back out for any reason.  Seller paid airworthiness items, but if he didn't want to cover any airworthiness item he was on the hook for the cost of the inspection.

When I sold my airplane I wouldn't accept that term when proposed by the buyer.  It was a price issue- I priced the plane to sell- if you want a full-retail like term in the purchase contract, you get to pay full retail.

In addition, I wasn't willing to accept any financing contingency in the contract.  Told the buyer he had 5 days from the conclusion of the pre-buy (which was defined in the contract) after which the deposit became non-refundable.  If the deal wasn’t closed within 30 days the contract was canceled and I kept the deposit.  I'm not going to tie the plane up in a contract that gives a buyer full rights to walk away without some penalty.  A real buyer won't have any problem with that type of term either- particularly on a $100K airplane.

Edited December 8, 2018 by smccray
We can blame Siri... yeah- that’s it...

[carusoam]

@smccray

I think Siri may have adjusted one of your wasn’ts With a was..? (The last one)

She does this to me often...

Best regards,

-a-

 

[RobertGary1]

2 hours ago, James0519 said:

Hmm all these comments are invaluable. I appreciate the loan advice. Only issue with the loan is there are additional fees you have to pay to the loan company. I can do a title search myself and see if there are leins through AOPA. 

Doesn't AOPA still do their escrow service? I know I've used it before. I would avoid loans at all costs.

-Robert

[smccray]

10 hours ago, carusoam said:

@smccray

I think Siri may have adjusted one of your wasn’ts With a was..? (The last one)

She does this to me often...

Best regards,

-a-

 

Yeah- got that one wrong- i’ll try again

I was unwilling to accept a financing contingency. Buyer had the right to walk away for any reason up to 5 days after the pre-buy.  If he couldn’t get his financing in place within that time period the plane goes back on the market and the deal breaks up. I’m free to sell, he’s free to submit another offer to me, but he no longer had the plane under contract.

Seller was also obligated to close on the plane after 30 days. If the deal couldn’t get done after 30 days, the deposit is mine and the deal breaks up. 

[laytonl]

I have used Aerospace reports for title search and escrow on several transactions, both buying and selling.  

When I bought the Citabria earlier this year owner said just said to send a $500 deposit and a note about when I will close.  He said a verbal agreement was fine but I wanted something in writing, so I sent him my offer in writing and and he signed and returned.  He didn’t see the need for an escrow service but I insisted because I was several states away and didn’t know him.  Fortunately I was dealing with a forthright owner.  The prebuy didn’t find any AW issues though there were about ten minor squawks. The prebuy mechanic set the report to both me and the owner.  I called the owner to talk about the squawks and he had already had his mechanic fix the issues.  The first time I saw the airplane was two weeks after buying.  So far, it’s been a great airplane with no issues.

lee