Keeping control of your price and information:
Hello, Jake Huling here with Aircraft Sales Advisor. I’d like to welcome you to the fourth report in a new series called, 9 Steps to a Successful Sale or Purchase of Your Plane. In the last report we discussed Bringing a Plane to Market and the Different Types of Buyers and Sellers. Why different asking prices require different buyers and different strategies to reach those buyers. And we looked at the different categories a buyer falls into, and why it’s important if you are a buyer, to know what type of buyer you are.
We also looked at how much the difference can be between Wholesale and Retail using a 2007 King Air B200 as an example. And we covered how to go about the search for your next plane, commission rates, what they should and should not be. And I showed you how you can save money when you are both selling a plane and buying your next one. You can also watch the first report in the series called, Selling and Buying a Jet or Turboprop Aircraft and the truth about selling your plane.
In this report we are going to cover selling a plane on your own, the pros and cons of this approach, the importance of keeping control of your information, and how to handle brokers when they contact you about your plane.
Selling a plane on your own.
Let’s start out by agreeing that we’re going to take a look at this one objectively, because generally people are very polarized with their opinions on this topic.
Brokers for example will usually tell you this is a bad idea and you should never buy or sell a plane on your own, and owners tend to be split on their opinions. Some have had bad experiences with a broker or brokers. And others go this route because they believe it will save money. Other owners would say you should always use a broker because of the time investment needed when selling a plane or searching for your next one. And there are those who don’t know, and don’t care to know, all of the technical details needed to sell or purchase a Jet or Turboprop aircraft.
So, where do I stand on this? Well, that depends on who you are as an individual or corporation, and on your particular set of circumstances. There are times when the right broker can save you money, help you get the right plane, or get your plane sold for a higher price. And I also believe there are times when you as an owner or corporation, don’t need a broker.
The pros and cons of selling a plane on your own.
One example of when you wouldn’t need a broker is if your plane was simply changing from one of your companies to another of your companies. Another example could be if you were selling or buying a plane off market to someone you knew or did business with.
Now that approach can work as long as both sides are very comfortable with the plane or planes involved, and each party is experienced with this process and they have also each owned and operated a similar type of aircraft before. But here’s the thing, this scenario can also have big problems. If the plane showed up and is in need of something unexpected and very expensive for maintenance, or one side finds out they paid too much or got too little for their plane. Another danger is when one of the sides has never owned a similar jet or turboprop and is unfamiliar with the capabilities and costs associated with their new plane. So be careful with this scenario, it can work but you need to exercise caution. If there’s any doubt, then it might be worth hiring someone who can, for a fixed fee, look things over, answer any questions you have, and protect you while walking you through this process. And that can also protect your business relationship.
Next let’s cover some things you may not know.
If you’re going to sell your plane on your own, and you plan to put it on the market, there are some things you need be aware of. I’ve had owners say they don’t want to go with just one broker because it would tie their hands. And wouldn’t it be much better to have many brokers working to try and sell their plane instead of just one? Or, I really don’t want to use a broker because I don’t want to pay a commission. These are actually really good questions and they deserve to be answered.
The first thing you need to know is that there is almost always, and I mean 99% of the time, a commission is paid whether you've hired a broker or not. It may not be an amount that you’re aware of, or by the time you do find out, it’s after the sale and too late, but there's almost always one there. And the question you need to ask is, whether that commission is being paid to someone working for you, working for someone else, or working for themselves?
Remember in the first video report in this series when we talked about how brokers get in between you and the buyer or seller? And how it can look like they are the ones selling a plane or buying yours, but it’s actually just changing hands with a markup that’s usually a lot more than what you would have paid in a commission. So you can end up paying a commission without getting any of the benefits of having a good broker working for you.
Now if you are experienced in these areas you may be just fine, but if you are unsure or uncomfortable, it might be better to know what the commission is by having a broker work for you. Because, if they are working for you, you not only know about the commission, but also have a say in how much the commission is. Either way you choose to go, this is still something you should know about and be careful with, because it can cost you a lot of money.
Information, to control or not to control?
The second thing you should know is what happens when information is not controlled. What do I mean by not controlled? Well you’ll have to follow me on this next part because it may sound like I’m trying to talk you out of selling a plane on your own, but these are the things you will need to know, and have to deal with, if you choose to go this route.
When information is released into the market without control a couple of things happen. Let’s say you’re selling and brokers learn about your plane because they’ve called and you’ve given them a sale price but no control, meaning it’s not their listing and they see it as an unrepresented plane. They each know that any other broker could sell your plane at any time. So instead of a broker representing you with control, and keeping the sale price of your plane up, each broker who has someone interested in your plane will offer it to that person with the lowest number they think you may take, and often it’s a lot lower than you would actually take. The reason they do this is because it’s the first broker who brings you an accepted offer who gets paid. So they aren’t going to spend extra time negotiating a higher price for you because, one they don’t benefit from it, and two nobody gets paid for second place or for spending extra time helping you get a higher price.
Something else that can happen with uncontrolled information is the scaring away of potential buyers. How does this happen? Well, there are at any given time, only a limited number of customers looking for your particular type and year of plane. If a buyer is contacting different brokers looking for a plane like yours, each of these brokers who know about your plane will show that buyer information on your plane. When the buyer starts to see the same plane presented to them several times from different brokers, often each time with a different asking price, the potential buyer can start to get nervous. They wonder about reliable information, and possible fighting between different brokers over commissions. And especially when there’s a lot of other planes to choose from, they’ll simply move on to the next one.
So, how do you handle brokers when they call you?
It is important to note that no matter what approach you choose the key is to control your information on the plane you are selling or what you are looking to buy. When a broker contacts you, the best advice I can give you is that you need to act as your own broker. You need to be aware they are looking for a commission, and if they’re not getting paid by the buyer or seller they’re going to be looking at your end to get paid. The best thing you can do is to know your information: what the plane is worth you are selling or buying and why, what your asking price or what your offer is and why, and that you understand they’re going to want to get paid for bringing you a buyer or a plane. So find out if they are getting paid from someone. If they’re not, talk to them about a commission, let them know you understand how this works and that you are willing to pay a fair commission. Which also means you need to have a commission worked into your numbers.
So What’s Next?
Well, we just talked about the importance of knowing your numbers and the value of the pane you are selling or wanting to buy. So in the next video report we’re going to talk about one of the more confusing factors when determining a planes value. And that is aftermarket upgrades, what the different costs are, the value it adds to a plane in both dollars and appeal, and which ones hold their value.
So that’s it for this report, thank you so much for joining me on this forth step in my newest series of reports called, 9 Steps to a Successful Sale or Purchase of your plane. This is Jake Huling with Aircraft Sales Advisor, and I look forward to seeing you on the next one.