Think of pre-approval as a license to shop. With a pre-approval, you now have 90 days to find and close the deal on an aircraft of the agreed-upon type and in the agreed-upon price range.
Pre-approval doesn't mean you can buy any airplane in that price range. For example, you might discover a Beechcraft Duke, with recently overhauled engines and an updated panel, for the same price as that Piper Saratoga which first inspired you to stop renting and start owning. Switching categories from a single-engine to a multi-engine aircraft, or certified to experimental, can change the available terms and qualification requirements for a lender. In a case like this, it’s best to check with the lender before agreeing to a purchase and assuming your pre-approval is a blank check.
Similarly, if you decide to buy something significantly more, or less than the pre-approved amount, your ability to complete that purchase may be in jeopardy. Other airplane factors that may jeopardize a pre-approval include an engine very close to TBO, an with 10,000 hours or more on its or airframe, or it hasn’t been flown in over a decade. Before getting a pre-approval, it’s best to speak with AOPA Finance about your plans for a purchase and the type of aircraft you are considering. A narrower scope of possibilities is much easier to manage with pre-approval than a wide range of aircraft.
In tight markets, the airplane you like is likely in the sights of others, so, in addition to a pre-approval, you’ll need two powerful weapons to help you fend off other buyers. These two items are a purchase agreement ready for the seller to sign (contingent upon satisfactory pre-buy inspection and financing) and an escrow account set up with a reputable title and escrow company.
AOPA partners with Aero-Space Reports for title and escrow services and we have sample purchase agreement templates available for download on our website. The purchase agreement templates have been reviewed and vetted by our in-house attorneys.
Why an escrow account? Most lenders require escrow to close the transaction. It also shows the seller you’re serious because you have committed funds to the deal. And, while tying up the airplane in escrow cannot fully prevent losing the airplane to a cash buyer, it can improve your chances of success. Escrow can also help you with due diligence on the airplane by completing an FAA records search.
Why are the financing and pre-purchase contingencies stipulated in the purchase agreement so crucial? First, while you may be pre-approved, the airplane still has to be approved by the lender. Second, the pre-buy inspection ensures you don’t succumb to “tight market hysteria” and buy an airplane that might not be airworthy.
Great advice. Great rates. Helpful and responsive reps you can trust. Three good reasons to turn to AOPA Aviation Finance when you are buying or refinancing an airplane. If you need a dependable source of financing with people who are on your side, just call 800.62.PLANE (800.627.5263), or click here to request a quote.
