Whether you’re buying or selling an aircraft, there are many things to watch out for. A broke broker is one of them!
You trust your broker to represent your interests, not his own. But when the market is down, brokers with a shallow network or thin reserves may have a more difficult time representing deals impartially, or advising you against a purchase or sale that doesn’t fit your needs or expectations.
And in aviation, as in all other industries it seems, scams do occur.
In the United States, every state requires that real estate brokers be licensed. Although an aircraft can be a similar (or greater) investment, no state requires that aircraft brokers to be licensed.
This leaves the door open to anyone who has the means and connections to advertise his services and convince customers of their ability to acquire or sell an aircraft.
Of course, being in the business, I have heard a lot about aircraft sales scams that buyers have endured before they found us. Here are a few examples.
Here are a few aircraft sales scams to look out for:
Fantasy Listing Scams
You see a fantastic aircraft online or in one of the popular publications with beautiful photos. All the maintenance specifications are near-perfect, and the price is unbelievably low. Of course you call the broker to find out more, to be told that this airplane has just been sold, but there are others in inventory that might suit your needs better. A skillful song and dance ensues.
The reality is that the “fantasy plane” that elicited your initial call may not have existed at all. Often times referred to as “I got the plane for you!” then it mysteriously vanishes.
Since all US registered aircraft are listed with the FAA, it’s easy to check up on this using a tool like the FAA’s N-Number Registry. Often you’ll find that the aircraft that was “just sold” was sold three years ago, or that the tail number doesn’t exist, or belongs to a different aircraft type than what was listed in your “fantasy listing.”
Of course, the aircraft that the broker is REALLY trying to sell you actually DOES exist, but starting the relationship with a misrepresentation doesn’t bode well for a happy ending.
Incomplete or Improper Documentation Scams
Aircraft owners may be unaware that an airplane is worth less without the complete documentation and logbooks.
It could be illegal to fly it, and illegal to even sell it for anything other than parts. And many of the parts can’t even be sold without proper inspection, repair, and damage history documentation, back to “birth.”
In some extreme cases, unsuspecting buyers have put down good money in the purchase process for airplanes with missing or incomplete documentation that they should not y purchase, or if the broker is able to slip the purchase through, the new owner may have an apparently perfectly good airplane that he can’t legally fly or sell until remediation of deficiencies in documentation and/or aircraft.
There have stories where a broker asks the potential buyer lots of questions and acquires specific details about the aircraft he is looking for, and goes off to do research. He calls back to say that he’s found the perfect airplane, and even better, the plane belongs to a distressed seller who is anxious to get rid of it at a price well below market value. Of course, because of the situation, there is some pressure to get the transaction going. The buyer acquires a deposit for the purpose of flying the aircraft to an inspection facility and other seemingly reasonable procedures, promising to “catch up the documentation later” because of the urgency of the situation.
The plane may or may not be flown to an inspection facility, may or may not be completely unsuitable and not as represented, and the “broker” may or may not disappear at some point during this process. There are endless variations!
How to Avoid Problems
Aircraft sales scams are easily avoided, and the entire industry would be better off if aircraft purchasers would take a few simple precautions:
- Any deal that is “too good to be true” probably is. While “distressed buyers” and “great opportunities” sometimes do happen, common sense is the rule here as well as in any other business transaction. A reputable broker expects and will have reasonable answers to your questions.
- Urgency is usually not in your favor. A broker that is in a hurry to get you to part with your money, while having significantly less urgency to provide documentation and answers , is often signalling trouble.
- Check your broker’s history and references. A reputable broker will have several verifiable sources that will vouch for having a good experience. Ask your broker to provide the details as to that which is an ordinary and customary transaction in the industry. If you’re not sure – contact me!
Have a transaction in progress? Would you like a second opinion? We’d be happy to look it over with you.
Considering an aircraft sale or purchase? We’d be even happier to do it right for you from the start.
Call our office at (425) 822-7876 and let’s schedule a time to discuss your needs!
Have you heard of a scam you’d like to relate? We welcome comments below!