Pre-buy Inspections and Purchase Agreements

So, with a recent posting of a WTB on an aircraft, actually brought up a good point. Didn't want to hijack his thread so I am starting a new one.

I would think that before you engage in a pre-buy inspection that there would be some pre-buy paperwork that would spell out the levels of commitment after the usual tire kicking is done.

Excluding those that have been lucky in their dealings with purchasing flying RV's or even second hand kits... what is the consensus when it gets to the various levels of commitment? Legal paperwork that holds a seller accountable if they should pull out last minute and the buyer is left with a bunch of expenses?

And please, no subject drift... start a new thread if you need to go on a tangent.

In large aircraft circles there are letters of intent/agreements/contracts etc for each stage of the purchase. An aircraft doesn't go anywhere near a facility to receive a pre-purchase inspection without there being a signed agreement that covers the scope of the work to be completed, who pays for what and details on how either party can end the transaction.

Doing something similar for small aircraft would be simple enough.

I just bought an RV-9A today actually... Did an email "letter of intent" first. Sort of a purchase agreement. Then we did a real purchase agreement that we both signed. Then did pre buy inspection. Then I flew down to TX today, closed the deal, and flew her home easy breezy

jdwky said:

I just bought an RV-9A today actually... Did an email "letter of intent" first. Sort of a purchase agreement. Then we did a real purchase agreement that we both signed. Then did pre buy inspection. Then I flew down to TX today, closed the deal, and flew her home easy breezy

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Congrats!
(Extra words.......)

jdwky said:

I just bought an RV-9A today actually... Did an email "letter of intent" first. Sort of a purchase agreement. Then we did a real purchase agreement that we both signed. Then did pre buy inspection. Then I flew down to TX today, closed the deal, and flew her home easy breezy

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Did you put any money down?

Did your "for real, signed " purchase argeement have a method for you - the buyer - to back out if the Pre-Buy inspection revealed defects you were not willing to live with?

Any penalty paid by you for backing out?


Did your for real, signed purchase agreement stipulate a price you both agreed to? If so, what would you have done if the pre-buy revealed a problem you were willing to live with but would make you want to offer less?

Obviously there are many ways you can structure a deal, and beyond that you may want to structure a deal one way on one transaction and differently on a second, depending on circumstances.

I can see that the OP's question was prompted by the other thread where the prospective buyer effectively lost the $ he paid for a pre-purchase inspection when the seller changed his mind at the last minute and decided not to sell. So the question becomes whether there's something you can do to protect yourself from that and, if so, is it worth it.

I tend to disagree with the idea that it would be easy to write something up that erases the concern. As an example, in my neck of the woods when a buyer offers to buy a house he generally puts a deposit down that goes into an escrow account (typically held by the realtor) and a contract is signed providing that the buyer has the right to perform a pre-purchase inspection within X days, and if the inspection discloses significant defects the purchaser has the right to cancel the contract and receive his money back. The contract has multiple pages and is extremely detailed but, as you can imagine, all that detail doesn't prevent problems and disputes from arising all the time. You can imagine all the cases where the inspection discloses problems that the buyer says justify cancellation, while the seller says they do not. The buyer says his deposit should be released from escrow and returned to him, while the seller says the sale should proceed or the buyer's deposit should be forfeited to him because he lost his opportunity to keep marketing the property while he was tied up with the buyer.

When you're considering purchasing a small aircraft, how are you going to legally hold the seller responsible for proceeding with the transaction if you wish to do so after your pre-purchase inspection is complete? Probably by putting some money down and having some type of written agreement. Who is going to hold the money? Obviously the seller, unless you decide to retain (and pay for) the services of an escrow agent. Do you really want your seller holding your earnest money? Can you rely on the seller to return your money if you say there's a significant defect but he says there isn't and you are just looking for an excuse to cancel because you've gotten cold feet or maybe found another aircraft in the mean time?

I think in most cases, particularly with homebuilt aircraft where the quality of construction is unknown and one example may vary widely from another, I personally would rather take the risk of losing my pre-purchase expenses in the event the seller changes his mind (or accepts another offer) than put earnest money in his hands in hopes he will return it on demand, or try to get him to agree we'll hire an escrow agent, etc. I might end up losing my expenses to check the aircraft out, as happened to the buyer in the other thread, but the value to me is that I am not committed in any way and remain free to walk away for any or no reason whatsoever.

Anyway, none of this is intended to be legal advice obviously, and you might prefer a different way of doing a transaction. In fact, it's my understanding that aircraft deals are done all the time under different terms. It's just my preferred course of action for myself, and the way I did it when I purchased my already-built RV.

jdwky said:

I just bought an RV-9A today actually... Did an email "letter of intent" first. Sort of a purchase agreement. Then we did a real purchase agreement that we both signed. Then did pre buy inspection. Then I flew down to TX today, closed the deal, and flew her home easy breezy

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Congrats on the purchase, and glad it worked out for you. An example of one way to do a deal.

Flew out of state to close a deal, flew your new aircraft home, and still got around to posting about it on VAF, all in the same day? That's pretty good, no kidding.

It's a question of honor

I am not a lawyer; didn't play one on TV; and I slept at home last night and not at Holiday Inn. Nevertheless, I have an opinion

I don't think you can legally force anyone to sell anything.

If you try to get the seller to sign a contract saying that the seller will reimburse you the cost of a Pre-Buy, should they take the plane off the market after the Pre-Buy, but before the deal is made, what will happen is:

1) The seller won't sign it...then what?

2) The seller signs it but gets a better offer, and chooses to sell to the better offer. That's not taking it off the market. So you lose your Pre-Buy. There is nothing wrong with the seller doing that. This happens a lot.

3) The seller gets around your contract by placing an ad in VAF For Sale but accepting no offers - including yours - until the ad goes away. The seller is not required to perpetually keep the airplane on the market.

It's difficult to write a contract that will satisfy both parties when it comes to a pre-buy. You simply have to risk the money, is the way I see it.

So it's a question of honor. If the seller didn't check with the family before offering the plane for sale, or didn't make sure there was no impediment to selling the plane, then the seller was stupid.

If someone expends time and effort and money to get a Pre-Buy done and the family then tells the seller not to sell, you can't force the seller to sell.

If the seller then chooses to reimburse the pre-buy cost because he/she understood they were being stupid in not doing due dilligence in the first place, then the seller is stupid but honorable. We all make mistakes.

If the seller does not reimburse the money the seller is both stupid and dishonorable. Their stupidity or laziness or whatever cost the prospective buyer time and money, and to not pay for that stupidity is dishonorable, I think. However, you can't force them to pay. They don't legally HAVE to pay. Which is why I see it as a question of honor.

YMMV

We went to see the plane, did a thorough inspection, settled on a price, shook hands and closed the deal. I left a small deposit, came back a week later and after a briefing we took her home. I am always wary of people who present me with a lot of legaleez. JMTCW

Having just concluded the process for purchasing an already-flying aircraft, I will admit that it took me 3 tries on 3 different aircraft to get the process through to a close...

I Googled up "aircraft sales agreement" (or words to that effect) and found some sample docs on the web at AOPA and elsewhere, then cobbled them together to allow me to control the process as much as I could, yet try to treat each party as fairly as possible.

I was pretty explicit about the pre-buy costs incurred and who bore those (mostly me) but in exchange for that I wrote language into the contract that allowed me, in my "sole discretion" to make the call on what "passed" or "failed" the pre-buy and that then allowed me greater control when I had to unwind 2 of the deals when the aircraft failed inspection.

I concur with other's opinion's that while you can't write language that forces a sale, you can write into the contract that if the aircraft passes inspection yet the seller fails to fulfill/complete the sale that your expenses would be reimbursed.

Might take a small claims court experience to make that happen, but at least having the language in a signed, witnessed contract gives you a fighting chance if it gets to that.

My law experience is sitting on a few juries as well as watching a lot of TV shows with lawyers in them, so Caveat Emptor on my free advice!!

Good luck with the search, it took me ~1 year to find my RV!

Rob S.

Saville said:

Did you put any money down?

Did your "for real, signed " purchase argeement have a method for you - the buyer - to back out if the Pre-Buy inspection revealed defects you were not willing to live with?

Any penalty paid by you for backing out?


Did your for real, signed purchase agreement stipulate a price you both agreed to? If so, what would you have done if the pre-buy revealed a problem you were willing to live with but would make you want to offer less?

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I did not put any money down. The purchase agreement did stipulate purchase price. I am not a lawyer. I used a general, fill-in-the-blank form provided by finance company.

With any deal, it comes down to the quantity of AMU's involved, and the integrity of buyer & seller. My seller was very honest, straightforward, and very easy to deal with. I feel the deal would have completed the same with a simple handshake beforehand. Every deal is a risk of some sort. Even if you involve an attorney, you can still get screwed. Such is life. Buyer beware.

precession said:

Congrats on the purchase, and glad it worked out for you. An example of one way to do a deal.

Flew out of state to close a deal, flew your new aircraft home, and still got around to posting about it on VAF, all in the same day? That's pretty good, no kidding.

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'Twas a long day indeed! Got up at 0445, got home at 2300. I can't go to bed without checking VAF though! Do I get extra points for wearing my new VAF tshirt all day? Yea, I'm that guy and proud of it!

In all seriousness, there were multiple long phone conversations with the seller and seller's A&P IA before flying down there. My gut knew "this is the plane". If your gut gives you any doubts, proceed with extra caution.