HIRING AN AIRCRAFT BROKERJEFF WIEAND | APRIL 2020
- May 10, 2020
- Aircraft For Sale, Aircraft Market, Aviation, Buying & Selling Aircraft
- Posted by jonathon
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No matter what they sell—used cars, securities, aircraft—brokers don’t always enjoy the best public reputation. In my experience, though, most aircraft brokers do try to represent the best interests of their clients. That doesn’t mean, of course, that they’re equally good at their jobs. Here are some things to consider when hiring a broker to sell your business jet.
The first step is to identify some candidates. You may find that they come to you. Brokers are always looking for listings and sometimes contact people they think might be interested in selling an aircraft. Obviously, you shouldn’t hire a brokerage just because it’s the first one to call you. One place to investigate further is the website of the International Aircraft Dealers Association (IADA, formerly NARA). As of this writing, iada.aero lists 42 IADA “accredited dealers,” including some of the best-known business aviation brokers in the U.S.
The IADA website would greatly simply your search if not for the fact that the vast majority of aircraft brokers (including many well-known ones) are not members of that organization. You can find many more on the National Business Aviation Association’s website, which lists over 500 companies engaged in aircraft sales. To whittle this list down to a manageable number of candidates, you will have to consult people you know and trust. Firms that deal regularly with brokers, such as aircraft acquisition consultants and aviation attorneys, are often good sources of referrals.
Once you have narrowed the list to several candidates, ask them for marketing proposals, which if nothing else will show you how firms that want to market your aircraft market themselves. Visit brokers’ websites to see how they sell other aircraft, and arrange meetings with each candidate, if possible. If you can get references, call them; a prominent broker once told me he was astonished by how few prospective clients contact the references he provides.
One of the most important considerations in evaluating brokers is their experience. Has a brokerage been in business for 30 years or is it just starting out? What aircraft has it sold in the last few years? Does the list include aircraft like yours? A broker specializing in, say, the Cirrus SR20/22 would be a poor choice to market a Bombardier Global 6000. The Cirrus broker won’t have the experience in the Global 6000 market needed to price your aircraft for sale or advise you about whether to accept or counter offers below your asking price. Nor will it have the expertise to deal with Global 6000–specific questions from potential buyers, such as “How does the Global 6000 differ from the Global Express XRS?”
Yet such multiple listings of the same model jet point to a potential problem. Suppose you are selling s/n 8 of model X and the candidate broker already has a listing for s/n 9. When prospective buyers call, you may worry that the brokerage will push the other aircraft, especially if it has had the listing for a while. You may have the same concern about a broker that is also a dealer (not to mention the manufacturer) that actually owns the competing aircraft. To further complicate the issue, a competitive situation can also arise between different models of aircraft that are archrivals, such as the Falcon 2000 and Challenger 604.
Of course, brokers rarely have listings of aircraft with consecutive serial numbers. Even if the serial numbers are close, the two aircraft might still be priced quite differently, based on factors such as airframe time, equipment, and damage history. But there may nevertheless be advantages to selecting a broker even if it has other listings for your model and the concerns seem valid. As suggested earlier, multiple listings may be evidence of the broker’s depth of experience with your kind of aircraft. True, someone may call about your airplane and end up buying another one listed by the broker. But the reverse is also possible; buyers who call the broker about another aircraft may end up buying yours.
Incidentally, brokering of competing aircraft is not the only conflict of interest a broker can have. Consider whether the broker also represents jet buyers or is in the jet appraisal business. Under some circumstances, these activities can also create conflicts for the broker. I remember speaking to a seller who, after its aircraft languished on the market for months, was distressed finally to receive an offer…from another client of his own broker. (“How am I supposed to evaluate this offer?” the seller wondered.)
A classic issue in selecting an aircraft broker is the size of the organization. A big brokerage with listings for 30 jets may seem to completely outclass a one-person shop. But at least when you call the one-person shop, you know who you’ll get. On the other hand, when you call the big operation, you may find yourself shunted off to a junior staffer—the same one potential buyers of your aircraft may be talking to. If you selected a broker based in part on how well you interacted with someone there, you may want to ensure that he or she will be personally managing the sale of your aircraft.
One reason you should request proposals from several brokers is to compare the brokerage fees and the handling of marketing expenses. You may want to negotiate your own fee arrangement. Rather than agree to pay the broker $150,000 no matter what the sale price is, for example, you could offer to pay based on a sliding scale: $130,000 at price X and $170,000 at price X+Y.
You need not insist on hiring a broker in your area. Working with someone local can have minor advantages, but it’s less important than hiring a reputable, experienced broker who will work hard to sell your aircraft. \
Don’t pick a brokerage because it has the lowest commission. You don’t want to overpay, but you also want to make sure the firm you hire is properly motivated to sell your aircraft.
Don’t hire a broker just because it says your aircraft is worth more than the competition says it is. Is the firm smarter than everybody else, or is it just trying to get the listing? You don’t want to get a call from your broker after two months asking for a drastic price reduction because it turns out your Hawker 800A isn’t worth $10 million.
And don’t let the broker act as your attorney, providing and negotiating a purchase agreement. Get your own aviation lawyer.
A brokerage arrangement should be written down. Most brokers have a form of agreement, and you should review it before making a final decision on which broker to retain. The agreements are subject to negotiation (see box). If you already know prospective buyers for the aircraft, make sure the agreement contains an exclusion stating that no commission (or a reduced commission, if you want the broker to help you wrap up the sale) will be due if one of them ends up buying it.
No matter whom you hire, keep in mind that you may have to wait a while to get your price—and that your aircraft is unlikely to go up in value in the meantime.