Determining the market value of an aircraft is a process that involves many different steps. You want to do things like get an appraisal and understand the fair market value for your aircraft. One of the most important steps in selling or buying an aircraft is its valuation.
Aircraft valuations are critical to making sure you are getting the best price. If you are considering buying or selling an aircraft, knowing where to start can be helpful. So, we’ve put together some information about buying or selling an aircraft using VREF aircraft valuations and appraisals successfully.
What Are The Differences between an Aircraft Valuation and Appraisal?
Most people never stop to think about the difference between an appraisal and a valuation, and most use the terms interchangeably. While an appraisal can be a type of valuation, it is important to know the differences and why someone would need one versus the other. The major difference between a Valuation like the VREF Verified reports and an appraisal is that an appraisal is a document that meets standards. These standards fall under the compliance of Uniform Standards of Professional Appraisal Practice (USPAP).
The Uniform Standards of Professional Appraisal Practice (USPAP) is the generally recognized ethical and performance standards for the United States’ appraisal profession. USPAP was adopted by Congress in 1989 and contains standards for all types of appraisal services, including real estate, personal property, business, and mass appraisal. Compliance is required for state-licensed and state-certified appraisers involved in federally-related real estate transactions. USPAP is updated every two years so that appraisers have the information they need to deliver unbiased and thoughtful opinions of value.
A Valuation will not meet these standards, nor are they intended to replace an appraisal. A valuation is typically used by a buyer or seller of an aircraft to determine its market value, gain insight into the strength of the market, the historical values associated with the model, and learn what equipment adds value or, in some cases, deducts from it. A valuation is intended to assist in “kicking tires” and giving a snapshot of value.
On the other hand, an appraisal is used for financing, estate planning, insurance, and legal purposes and is typically 50 pages or longer as it also includes sales comparisons and other specific data on the aircraft being appraised.
How Are Aircraft Appraised?
When getting an aircraft appraised, certain assessments must happen. Whether the appraisal is a desktop or on-site audit, the process is the same. First, an appraiser will go where the aircraft is located to perform an initial assessment. This is important to determine the condition of the aircraft and verify the serial numbers and equipment is accurate. When doing a remote assessment the appraiser will rely on the data provided to them.
The appraiser will document items such as the condition of the aircraft’s paint job. They will also check the interior of the aircraft. These two things are important factors that can affect the value of the aircraft.
Next, the appraiser will photograph the aircraft further to validate the condition and equipment of the aircraft. During this process, the logbooks will be reviewed, as this is another critical part of the appraisal process.
The appraiser will note if the logbooks have complete and consecutive information. Logbooks are important because they can provide evidence of any damage the aircraft may have sustained. The appraiser will also photograph the logbooks to be reviewed further at a later time.
An important part of the aircraft appraisal process is having a clear understanding of the equipment lists, installed avionics, installed STC’s, and the maintenance that was completed on the aircraft.
Things to Consider When Buying or Selling an Aircraft
It is important to consider that when buying or selling an aircraft, the appraisal process can differ. The reason being some appraisers doesn’t have the same level of experience as others. When looking for aircraft valuations having an expert in your corner is what you need, and having a fiduciary looking out for your best interests will make the difference in the long run.
This can make all the difference when determining the value of an aircraft. You also want to consider doing your own research first. While there is a wide variety of information online, understanding how that information relates to your situation is key.
You could consider hiring a reputable aircraft broker that follows the aircraft market to help you interpret prices and trends.
If you are considering selling an aircraft having professional photos taken can increase your pool of buyers. Leveraging marketing resources like social media can make a difference.
In contrast, if you are looking to buy an aircraft, you should consider a few things. One of those things is having a clear analysis of your utilization requirements. This will help you determine which aircraft models would be suitable for your use case.
The second thing to consider when undergoing this process is there are specific forms needed to complete your purchase. There are a lot of requirements that must be completed to buy an aircraft.
The last thing to consider is the future market value of your purchase. There may come a day when you will want to sell the aircraft. Understanding the future marketability of your purchase should be something you consider.
Ready to Buy or Sell an Aircraft?
Aircraft valuations are the first step when deciding to buy or sell an airplane. To walk you through this process, it can be helpful to get an expert opinion.
If you are ready to make the commitment and buy an aircraft, we’re here to help. We can also help if you are looking to sell an aircraft.
When it comes to your aviation needs, you should trust the experts. If you need an appraisal or aircraft valuation, contact Jason Zilberbrand, ASA, for help.