By Jim Becker
Accredited Senior Appraiser
First and foremost, aircraft appraisers need to be “airplane people.” They should really understand aircraft, not only cosmetically, but, more importantly mechanically and commercially. Somebody who isn’t regularly in the market may not pick up on the very real value differences between seating configuration, avionics, equipment, etc.
A good appraiser should be experienced at logbook research. They must have the ability to actually understand what is written in the logbooks, and be able to spot any red flags such as overdue maintenance and damage history. They should be competent to correctly appraise an aircraft.
About 99% of the time, aircraft are valued using a Sales Comparison Approach. This provides a more accurate valuation if there is a history of similar properties transacting on a frequent basis.
This approach requires getting the actual sales prices of similar aircraft that have recently been sold. Since the sales price of an aircraft is not required to be public knowledge, it is difficult to obtain this information unless you have a fairly extensive network of brokers and dealers who are willing to share this information.
Some appraisers don’t even try to obtain that information, instead they get creative. I have seen everything from aircraft-price-guide-derived proprietary programs to modified asking prices, to regression analysis. Although these are vastly different ways to value an aircraft, they have one thing in common. They are usually less accurate, and require a lot less time to derive a value. In other words it is a way to cut corners. I believe this is the crux of most inaccurate appraisals.
The appraiser should belong to an accrediting organization such as the American Society of Appraisers. This is important because an accrediting body has the authority to regulate its appraisers. There are education requirements as well as ethics standards. They require all appraisals to conform to the Uniform Standards of Professional Appraisal Practice (USPAP).
All members must stay current with USPAP by taking the renewal class every two years. They also have a discipline committee, where grievances may be aired against any possible competency issues. They must re-accredit every five years, and need 100 hours of continuing education and organizational participation to do so.
Finally, an appraiser should also be experienced in the area of damage diminution. Damage history is extremely subjective, and there is very little science involved in determining the proper amount of diminution in value. It takes experience to be able to properly analyze the effects of damage on the value of an aircraft.
Putting together an aircraft transaction today is difficult enough without having to deal with a bad appraisal. Ask some important questions before the appraisal begins, and it may save you a lot of headaches later.
About Jim Becker
Jim Becker is an Accredited Senior Appraiser with the American Society of Appraisers. He is also a graduate of the Aviation Institute at the University of Nebraska at Omaha, and also holds a F.A.A. Airframe & Power Plant Mechanic license. With nearly 25 years in the aviation industry, 20 of those years have been with Elliott Aviation in the capacity of valuing aircraft.