You found the airplane of your dreams, you have a lender, and you are ready to zip through the paperwork to get to your final goal—filling that now-empty hangar. The lender is happy to facilitate the deal, until a last-minute mix-up stalled your happy moment by weeks. There are several ways a deal can run into trouble. Here are four common mistakes that can delay yours:
One of the biggest delays comes from buyers who, at the last minute, decide their airplane could benefit their business and provide tax benefits if it is listed as a limited liability company. If that is you, here’s some advice: discuss the idea with a tax adviser who understands the nuances and tax benefits of aircraft ownership before you execute a purchase agreement. If not, and you decide last minute to change who will be the aircraft owner (your new LLC instead of you personally), all the loan documentation—that can be 30+ pages requiring 15+ signatures—must be changed to reflect the new company.
Sometime during an airplane’s history there may have been a lien on the airplane that was never properly cleared—perhaps the wrong person signed to remove the lien—it is not yet cleared by the FAA. It was the fault of the previous owner that now created what’s called a “cloud” on the title. Now the deal is on hold while the seller hires a title company or attorney to clear up past issues. Double check early in the game to make sure there are no liens on the aircraft by ordering a title search.
What can go wrong with a pre-buy inspection? It can be as simple as parts availability. What if you wait until late in the deal to do the inspection, and finds parts are needed to comply with an airworthiness directive? And what if those parts must come from a factory overseas? Suddenly everyone is waiting on the parts to arrive, and the deal is on hold. The secret is to hold off on scheduling your closing until you know the results of the pre-buy inspection. A pre-buy inspection will also determine if any airworthiness issues have not been addressed. Early warning is the secret to a smooth purchase experience later.
Begin sending in the required documents as soon as you have them. That way the documents can be checked as they are received, and if there are problems, a solution can be started immediately. All loan documents must be received by the lender and reviewed prior to closing. What if you arrive on the day of closing to discover that signatures were not notarized? Some lenders require documents have an original, not a faxed or digital signature, meaning you may need time to send overnight packages back and forth for the signatures. Again, early investigation into the use of signatures will save you headaches later.
Buying and selling an aircraft can be a lengthy process, but if you do your research and start early, you can avoid some of the common mistakes that often hold up the process.
Whether you are financing an aircraft purchase or refinancing, your colleagues at AOPA Aviation Finance
are ready to help. We’ll walk you through each step of the process. If you need a dependable source of financing or refinancing with people who are on your side, call 800/62-PLANE (7-5263) or visit aopafinance.com.