Why Do Buyers and Aircraft Finance Companies Avoid Aircraft Appraisals?
Imagine for a moment that you have been looking for your first or next aircraft. You may have tasked your pilot or some other resource to find that aircraft and spent thousands of dollars “in the hunt” – and possibly thousands more in one prebuy inspection after another. There may be thousands more spent retaining a law firm to assist with the overall purchase not to mention insurance and tax considerations.
You have looked at a number of “deals” only to find that they were not the deal you expected or surprises were found during one or more prebuy inspections. At some point, all of that pain is behind you now and you found a suitable aircraft that fits your budget and your expectations.
It may have even passed a prebuy inspection with flying colors. The purchase price was agreed upon even though the pricing source and details were a bit cloudy. The bottom line is that you liked the price and agreed to it.
The Speed Bump Dilemma
At this point, you don’t want any new “speed bumps” in the overall process prior to Closing and certainly nothing that would cause you to discard this candidate aircraft and begin the process all over or something that would cause you to renegotiate the deal.
If aircraft financing, the question of “aircraft value” may have come up and it certainly will for tax and insurance considerations. It is at this point most individuals in the overall process are satisfied with some number derived from a pricing guide (not suitable for appraising a specific aircraft by the way – per their disclaimer) and everyone moves on.
Never mind that those with a financial interest in the overall value of the aircraft provided the pricing/value information. Bank policy may force a more detailed analysis of the aircraft but more often than not, bankers will simply look the other way. After all, they have something from the broker/dealer/buyer and a Purchase Agreement in hand so this MUST be the aircraft’s market value – right?
Not necessarily – and this is why it is important to hire an unbiased trained professional that will actually look at the aircraft and it’s records BEFORE signing any Purchase Agreement or starting any prebuy inspection.
Understanding Price vs. Value vs. Market Value
“Price” and “Value” are terms that tend to get tossed around casually and “Market Value” gets thrown into the mix to confuse things further. For this article, let’s define some terms:
“Price” is typically what someone agreed to pay for something
“Value” is what the item is worth, but there are different types to consider:
- Orderly Liquidation Value
- Scrap Value
- Salvage Value
“Market Value” requires three conditions:
- A knowledgeable and willing buyer/seller
- Normal market conditions
- Neither party under any pressure to act
In most purchase considerations, “Market Value” becomes the focus. However, if any ONE of these conditions is not met for Market Value, then we are talking about some other undefined value versus Market Value.
The Knowledge Factor
Ideally, a buyer expects to pay Market Value within reason and this is what they believe they are negotiating for. However, sellers attempt to influence the “knowledge” and “pressure” factors thereby changing the perception of “Market Value” for the subject aircraft.
As an example, would a buyer elect to pay a premium price for an aircraft with damage history (which brings up the question of – what level of damage)? What if the buyer was unaware of the repair? What if the buyer knew about the repair.
How should they adjust their offer or is the asking price taking the repair into account? Knowledge is power and this is why buyers need the services of a trained professional to assist in identifying all of the positive and negative attributes of the aircraft.
What a Aircraft Appraisals Provides
The term “appraisal” is tossed around routinely and by definition an “appraisal” is an opinion of value. Therefore, it is neither right nor wrong, good nor bad, correct nor incorrect, accurate nor inaccurate. The opinion is either well supported by factual information or something less so.
Most clients are actually purchasing an appraisal report which provides that opinion but also supports it with stated research that is concise and easy to understand. The trained professional will not rely on unverified photos or details provided by individuals who may or may not have a financial stake in the transaction.
Instead, they research and gather this information either firsthand or using other trained professionals who are also unbiased.
The Double-Edged Sword
Having that type of detailed information could help any buyer in the negotiation of the price or eliminating that candidate altogether. It can help focus the pre-buy inspection on certain, suspect areas and it can help ensure that you are getting what you are paying for.
On the other hand, this type of detailed information may reveal issues that were undisclosed or overlooked during the pre-buy inspection resulting in an opinion of value that puts the purchase decision or related financing in jeopardy – thereby starting the entire process all over!
The Strategic Advantage of Early Appraisal
Engaging a PAAO Certified Appraiser early on in the process not only safeguards your investment but also streamlines the entire transaction. An unbiased appraisal arms you with objective, evidence-based insights—often illuminating issues or advantages that might otherwise remain hidden. It’s more than confirming a number; it’s about understanding the aircraft as a unique asset, with its own operational history, equipment upgrades, maintenance records, and market context.
By weaving the appraisal into your acquisition workflow, you create a feedback loop that informs every subsequent step. If an anomaly surfaces, you can pivot quickly—whether to renegotiate, demand remediation, or walk away with confidence before costs mount further.
Conversely, a clean bill of health from both the appraiser and pre-buy inspection builds trust with lenders and insurers, often smoothing the path for approvals and reducing overall risk.
Conclusion
Ultimately, the best acquisitions are those backed by knowledge, transparency, and collaboration among all parties. Rather than letting price alone drive the decision, let value—carefully assessed and thoroughly documented—be your compass.
In the competitive world of aircraft transactions, this rigorous approach not only protects your interests, but also ensures that your new aircraft truly fits your needs, your budget, and your expectations for years to come.
Frequently Asked Questions
Q.1 When should I order an aircraft appraisal?
Answer: Before signing any Purchase Agreement or starting prebuy inspections. Early appraisal efforts helps identify issues and supports negotiation.
Q.2 What’s the difference between an aircraft appraisal and pricing guide values?
Answer: Pricing guides provide general market ranges but aren’t suitable for specific aircraft valuation (per their own disclaimers). Professional Aircraft Appraisal Reports involve an unbiased examination of the specific aircraft’s condition, history, and unique attributes in the context of the current market.
Q.3 How much does a professional aircraft appraisal cost?
Answer: Costs vary by aircraft type and complexity, but it’s typically a small fraction of potential overpayment or hidden issues that could be discovered.
Q.4 What is a PAAO Certified Appraiser?
Answer: PAAO (Professional Aircraft Appraisal Organization) certified appraisers are trained professionals who follow standardized methodologies, Best Practices and ethical guidelines for aircraft valuation.
Q.5 Can an appraisal help with aircraft financing?
Answer: Yes, professional aircraft appraisals provide lenders with unbiased valuation data, often facilitating loan approval and potentially better terms.
