The Dos and Don'ts of Hiring Aircraft Appraisers
Having an aircraft appraisal completed requires locating a qualified and accredited appraiser. However, where do you start? An excellent resource for pilots and buyers of aircraft alike is the AOPA website, and it contains more unbiased information than any other source on the internet. Accurate and impartial data are two of the many reasons why AOPA and VREF have a strategic partnership going back many years. Financial institutions and insurance companies are also a great place to seek guidance on whom to hire to appraise. No two aircraft models are the same. An appraiser is only as good as the knowledge base they contain and certainly not all appraisers have equivalent knowledge bases. The first step in locating an apprisal firm is to find one like VREF that can provide an accurate valuation of the specific equipment. The truth is that many appraisers will accept a job only to call another appraiser who has the knowledge base to complete the job. Now that you know who can handle the appraisal job for you, what is the next step? Defining the work scope and agreeing what type of appraisal will not only be required but what the report will contain. Will the aircraft appraiser be conducting a desktop or going to see the aircraft? Before we go any further, it is essential to note that the importance of an aircraft appraisal can’t be overemphasized. While its true no one wakes up in the morning looking to get an aircraft appraisal completed, the truth is an Accredited appraiser can protect your backside. There is also a reason why in the United States banks require an appraisal, especially where there’s a financial transaction involved. What Does an Appraisal Entail? An aircraft appraisal is an objective opinion about the value of an aircraft. Aircraft appraisers are experts who very well understand the factors that make up the trends in the used and new aircraft market. The opinion is based on experience and repeated analysis of these factors. The opinion of value should be easy to substantiate and justify. For the appraisal to meet all the required standards, the appraiser must acquire all the relevant facts about the aircraft in question. Some key factors that play a role in overall value are avionics, modifications, upgrades, interior condition, exterior, and the pedigree of ownership. Another critical factor is the maintenance history of the aircraft. Here are some other dos and don’ts to consider as you hire aircraft appraisers. 1. Know the Reason for the Appraisal All aircraft appraisal reports are not equal, and the quality of the report should be nothing less than awe-inspiring. The purpose of the assessment determines the area the appraiser will look at and analyze. An appraisal for refinancing a loan is different from one that gives value for what the aircraft might cost to replace if it were damaged. Some other purposes of aircraft appraisal include: 1. To get the value of the aircraft as a safeguard against the capital gain and tax assessments. 2. Provide a basis for decision-making in committing funds for the acquisition. 3. Provide independent evidence of the aircraft’s condition. 4. Distinguish an aircraft from others that may be for sale. Later, the aircraft appraisers may be required to justify what they said in the context of the purpose of the report. 2. Find Qualified Aircraft Appraisers The aircraft appraisal industry is mostly unregulated. There are no required standards for training and experience. Lack of regulation means that anyone can technically give a value amount. However, this doesn’t give you a leeway to pick any appraiser that comes your way. Accredited Aircraft appraisers must meet various requirements by the Appraisal Standards Board, which stipulates and publishes the standards for appraisers. The board regulates the functions of appraisers, ensuring they live up to the rules of the ethics, and continued education. Two organizations to find lists of accredited appraisers are the American Society of Appraisers (ASA) and the International Society of Transport Aircraft Trading. Accreditation is by far the most critical factor when selecting an appraiser to conduct work and act as your fiduciary. Yes, like an accountant, your appraiser should be looking out for your best interests only! Without accreditation, there is no one making sure that the person conducting the appraisal will meet any standards, guidelines, and ethics. 3. Find Out How Much Time the Appraisal Will Take It would be best if you allowed enough time for the aircraft appraisers to finish their task. They may spend a day or two inspecting the aircraft but several days researching data. You’ll only be issued with the Certificate of Appraisal after the appraisal report is complete. 4. Understand the Different Types of Appraisal The Desktop Appraisal is by far ther most popular type of appraisal. It provides the intended user or the person that ordered the assessment with an accurate value based on the information submitted to the appraiser. An Accredited aircraft appraiser must complete this type of appraisal for it to be accurate. The sales comparison to market comparison appraisal is the most used methodology in machinery appraisal like an aircraft. The appraiser if utilizing the sales comparison or market comparison methodology, will evaluate an individual aircraft to see how it compares to similar aircraft. This way, he’s able to give a more accurate assessment of value. The appraiser will check if the aircraft has maintenance expenses coming up. Is the plane enrolled in any engine or airframe program s like JSSI, PistonPower, MSP, GeOnPoint? Are the avionics enrolled in HAPP or CASP? These, among other factors, will help an appraiser do a cursory check of the logbooks and specifications. Note that they don’t physically look at the aircraft when doing a desktop appraisal. Physical Appraisal This type of appraisal is the most invasive. In the aircraft industry, it’s considered the gold standard of evaluations. The aircraft appraiser must see the aircraft, review the records, and do a thorough investigation of the engine and maintenance logs. 5. Don’t Get Too Subjective While you now know what to do when looking for aircraft appraisers, there’s also something you shouldn’t do. It’s advisable that you don’t get too subjective. The best kind of appraisal is an objective one. Unbiased means that you need to be open to any outcome in the evaluation. Some specific selling points of the aircraft may not add up to the valuation you expected. Missing critical compliance equipment could be a recipe for values lower than what you expect. Aircraft Appraisers – Final Thoughts An aircraft appraisal can be a tricky affair. If you’re having an assessment done for the first time, it can be challenging to locate someone you can trust. For you to be on the safe side, ensure the appraisers you hire are accredited, experienced, and have knowledge in the field. VREF completes hundreds of appraisals in aircraft categories like experimental, light sport, piston, business jets, museum, warbirds, helicopters and commercial aircraft every year! You also need to know and distinguish between the types of appraisal available. The different types attract different costs. Having proper guidance and understanding the anticipated expenses will help you plan a budget. With the right kind of assessment at hand, all the parties to the aircraft appraisal will have some level of comfort. Keep your options and expectations open. By being objective, you’ll easily be able to manage any disappointment that arises from the final evaluation. Lastly, when looking to hire an appraiser look no further than VREF Aircraft Value Reference and Appraisal Services, the Most Trusted Valuation company in Aviation. Are you interested in an aircraft valuation guide? Be sure to place your order here.