Like many of my aircraft sales professional friends I had a good number of calls from people who, with days to go in 2019, called to ask, “do we have time to buy a plane yet this year?” They were motivated by either year-end tax benefits, but even more so because they were bombarded by eblasts with subject lines that touted amazing year-end deals. I assured my callers that if these opportunities were not sold by year-end they would not go up in price the next day as we go into the next year. In fact, they could be even better deals.
The callers even suggested that one way to be able to buy so quickly would be to delay a pre-buy inspection to post-closing with the seller putting some money into escrow to cover discrepancies. In a few calls the buyer even suggested no pre-buy at all if the deal were “sweet” enough. To me both of these suggestions were non-starters. In the case of a post-closing pre-buy where a seller may leave money in escrow here are the problems. First, what if during the pre-buy you discover a problem that would make the plane have a huge value loss and by then you own it. For instance, the inspection reveals corrosion in an area with a fix that created a major repair and to compound that created a non-standard reoccurring inspection protocol. Even in a hard deal that set of circumstances would provide an out for the buyer. The next problem would be defining well enough in a contract exactly what will qualify to be paid for out of escrow. The buyer would have lost all their leverage to persuade the seller to cover that rectification once the plane has been purchased. A real recipe for disaster.
The idea of no pre-buy at all, even at some reduced purchase price, can also lead to huge surprises and leave the buyer with a plane that was never contemplated or would have been completely out of the usual and customary method of due diligence and good buying habits. Make no mistake, having a buyer call and suggest an acquisition completed in days is music to my ears, however it is a song that one will quickly tire of.
This process of quick completion can absolutely work with a new aircraft purchase. In that case success can be more certain.
Now back to the title of the article. A rose by any other name. As I mentioned in the opening paragraph one of the motivations for a buyer was the attraction of the pricing based on the subject line saying call now for an amazing year-end deal. One of the companies that were running that subject line at year-end, and there were many companies doing that, started the year with the same plane being advertised only now the subject line read, “call now for New Year amazing deal”.
So the idea that the year-end deal would be better than the same plane that did not sell at year-end being available one day later is just not a solid reason to cast out smart buying habits and jump into a bad deal by missing the right steps to buy such an expensive asset. Take your time, don’t get lured into short circuiting process and I assure you the net result will be better pricing, eyes wide open process and clear skies.
Want to talk more about a right way, call me. Let’s discuss this. My phone number is 303-444-6766!
Happy New Year and I hope to bump into many of you in person or at least talk soon.