Escrow when purchasing a plane

[Jhj123]

Thought I’d ask a quick question, do you all recommend using escrow when purchasing a plane? I got a quote from AOPA provider but thought I’d check before starting the process

[carusoam]

Quick answer...

It all depends...  

 

Mostly, on how much the airplane costs....

And a bit, on how much risk tolerance you have...
 

1) If your purchase price is similar to your car... you probably didn’t use an escrow service when you bought it....

2) If your purchase price is similar to your house... all these small percentage payments, like a 10% down payment, is quite large when measured in AMUs....

3) Everyone has different risk tolerances...

4) Who you are buying the plane from also matters... is it a company, an MSer, or somebody unknown...?

5) When it comes to large financial transactions, use proper protection...

6) AOPA can be very helpful with their procedures to follow... and financing... and insurance... especially when you haven’t done this in a long while....

So... let’s start with how much is the plane, approximately...?  Is it a house or a car?
 

PP thoughts only, not a finance expert...

Best regards,

-a-

 

[midlifeflyer]

Yes. Period. 
 

OK, I guess there are exceptions. It's a very cheap airplane, it's a handshake deal, you are certain all the paperwork you receive from the seller for registration is perfect, and you have ordered the title CD from the FAA and understand everything in it. Or you don't care about any of that.

I have a non-escrow transaction on my desk right now. Came to me a year after multiple attempts to register were rejected due to the seller paperwork. And I just recently fixed another one. There's also one with an escrow where they found an unreleased lien. I expect the escrow company will have no problem fixing it before closing.

[1001001]

I'd recommend it.  It provides peace of mind for moving a large amount of money, and you usually get service for what you pay for--the escrow service handles the paperwork, all you and the buyer/seller do is write the sales agreement and wire the money.

If you don't know the seller/buyer, it's a good idea to have a detailed sales agreement hammered out in writing.  Not because people are bad or dishonest, but so that everyone knows what the expectations are going in.  I took the AOPA's suggested sales agreement language and edited it to fit our situation.  Using the AOPA language as a starting point sets in everyone's mind "this is a standard thing to do" and minimizes friction, IMO.

[GeeBee]

I insist on escrow regardless of which side of the transaction. 

As a buyer, I like to give the seller confidence in the deal before he delivers for a pre-buy by putting the entire amount in escrow

As a seller, I want to see you are really serious about completing the transaction. 

On both sides, if there is a problem in pre-buy you can often work it out with money left in escrow after closing to cover a conditional situation such as a engine corrosion.

 

[Unit74]

Ive bought a couple planes and both times used escrow. I think it keeps honest people honest to have an unbiased third party handle the deal. Not only that, they make sure all the paperwork is good and any hidden liens are found. On my last plane, they had to hunt down a retired AP to get a waiver on a lien before the deal would close. It was something like three owners back in the 80's!! It made it all the way till 2014 before it was "found and resolved" .

[MooneyMitch]

9 hours ago, carusoam said:

Quick answer...

It all depends...  

 

Mostly, on how much the airplane costs....

And a bit, on how much risk tolerance you have...
 

1) If your purchase price is similar to your car... you probably didn’t use an escrow service when you bought it....

2) If your purchase price is similar to your house... all these small percentage payments, like a 10% down payment, is quite large when measured in AMUs....

3) Everyone has different risk tolerances...

4) Who you are buying the plane from also matters... is it a company, an MSer, or somebody unknown...?

5) When it comes to large financial transactions, use proper protection...

6) AOPA can be very helpful with their procedures to follow... and financing... and insurance... especially when you haven’t done this in a long while....

So... let’s start with how much is the plane, approximately...?  Is it a house or a car?
 

PP thoughts only, not a finance expert...

Best regards,

-a-

 

Agree with above.   

It depends.  I’ve done both.

[Jhj123]

Thank you so much! Very helpful and makes all the sense.  Transaction is ~$100K so worth the money and since its my first plane, I am not familiar with paperwork, registration etc.  I will use the AOPA contract to move forward.  

 

Also, from your past experience, how soon can you close the deal after a successful PPI? Can it be done the next day or should i budget more time?

[midlifeflyer]

11 hours ago, Jhj123 said:

Thank you so much! Very helpful and makes all the sense.  Transaction is ~$100K so worth the money and since its my first plane, I am not familiar with paperwork, registration etc.  I will use the AOPA contract to move forward.  

 

Also, from your past experience, how soon can you close the deal after a successful PPI? Can it be done the next day or should i budget more time?

It can be done as quickly as everyone's schedule permits and due diligence completed. With scammers attacking escrows, many will have a waiting period on received funds. If you are just starting the escrow, you are going to wait for the title exam and, if a title defect is found, ideally you want it to be cleared before you release funds. Some paperwork may be filled out wrong and need to be corrected. Things like that - same sort of stuff as when you buy a house. But if everything is in place, it can happen very quickly.

[tmo]

I'd budget more time. Better to have a pleasant surprise than an unpleasant one. Mine took a few weeks, including a hail storm in the area where the plane was tied down outside while visiting.