When I was younger, my father used to solicit my assistance on weekends in his mechanical projects.  He was a pretty decent shade tree mechanic and loved to tinker with engines of all types.  At the time, I didn’t fully appreciate giving up my weekends but the experience taught me quite a lot about using tools properly.  Now most of us have used a pair of pliers to remove a nut or a ratchet as a hammer because the appropriate tool wasn’t at hand but doing so sometimes resulted in nuts being rounded off or the ratchet being damaged or the item you were striking being driven incorrectly.  My point is that when it comes to evaluating aircraft there are a wide variety of tools on the market to help the average buyer or seller but they should be used properly and the limitations should be clearly understood or you will wind up with less than desirable results.  In fact, in my search for aircraft as an NAAA Qualified Buyers Agent I have run across several aircraft that were either priced well below fair market value or way above fair market value for no other apparent reason than the “tool” told them to do so.  We all want quick, cheap and easy answers when evaluating aircraft but misusing a tool – any tool can cost you when the aircraft is overpriced and it takes longer to sell or when it is under priced and there is a loss of potential dollars. 

It would be tempting at this point to examine the tools on the market and their pros and cons but this exercise has been performed in the past and I will not reanalyze those results.  In fact, my website contains the results from an independent group who analyzed several web based tools against a reference aircraft and it may be helpful to examine those results to see how the tools compare as the results of each tool varied quite a bit for the aircraft being examined but my intention in this article is to focus on a few problem areas that would be independent of any tool.  I see these problems on a regular basis when I am in the field and they typically fall into several key areas.

Incorrect ratings:  Ratings (normally on a scale of 1 – 10) can greatly impact the results if used incorrectly.  First, it is important to understand the rating system itself.  Is it relative or standard?  If it is a relative rating system then you need to understand what the “average” aircraft looks like for the year, make and model under consideration.  For example, the airframe on an “average” 20+ year old 172 would most likely have a few dents and dings and possibly a little corrosion and the time on the airframe should be about “average” (and that figure is subject for some debate).  Now not having these imperfections would not necessarily rate a “10” but having them would put the aircraft closer to a “5” (the final rating would also need to factor in the airframe’s history including maintenance and damage among other things).  In comparison, a business jet that is 20 years old would normally have very few imperfections and this would be considered “average” for that particular type of aircraft.  My point being that the term “average” is relative to that specific age, make and model.

A standardized rating system uses the same criteria to establish a numerical rating regardless of the year, make or model of aircraft.  Let’s look at our 172 and business jet again.  The 172 rating would depend on the imperfections found and for the purposes of our discussion let’s say the rating is a “6” but the business jet – using the same criteria – would rate an “8” or “9”.  The difference is that the software tool uses a weighted system as part of its calculations more to the point, the business jet is not overvalued using the higher ratings.  One would not normally expect business jets to have dents, dings, or deformations on the leading edges or obvious signs of corrosion and if those imperfections do exist, the aircraft’s value is penalized accordingly.  On the other hand, if our 172 was in the same type of condition as the business jet it would also receive an “8” or “9” rating which in this case would increase the value quite a bit because those attributes on an older 172 are not normally seen.  The real rub is that the individual selling the aircraft always believes their aircraft is a “10” through and through while it is usually quite less.  The buyer tends to have a very different view toward the opposite end of the scale.  The reality is usually somewhere in the middle but both parties tend to have an emotional and financial stake in the deal and therefore neither typically has an unbiased view of the aircraft.  Add to this confusion the fact that the tool may be using a standardized rating system but the user is using a relative system (or vice versa) and you have the makings of big discrepancies in aircraft values.

Another good example of confusion over ratings comes from one of the published guides.  It indicates that a “7” rating for ANY aircraft’s exterior should have a small number of scratches – about 3 or 4 per square foot.  Now imagine an aircraft completely covered with 3 or 4 scratches per square foot over the entire aircraft (think of our 172 and business jet again) and ask yourself if that aircraft is really considered to be “above average” and you begin to understand the problem with rating systems.

Damage History:  Damage and what constitutes “damage history” is misunderstood by a good number of individuals.  This includes aircraft owners and mechanics alike and many tools do not address damage at all but for those that do, the damage history of the aircraft needs to be clearly understood – and I include missing log books here as well.  If you have missing log books (including missing pages), the market places a penalty on the aircraft that is the equivalent to “Major Damage History” because there is a portion of the aircraft’s maintenance life that cannot be accounted for.  Normal damage will carry a financial impact as well but you need to do an assessment of the damage and the associated repairs to characterize the aircraft correctly.  Here is a real world example.  I ran across a buyer whose aircraft had a serious nose wheel accident.  The FAA and NTSB records showed the damage to be substantial and during his evaluation it appears that he rated the damage as “Major” and priced the aircraft accordingly – doing exactly what the tool told him to do.  However, the log book entries showed the aircraft being returned to the factory and all new components were used to repair the aircraft.  My assessment was that the resulting damage was “Minor” at worst due to the types of repairs that were completed.  The difference in our opinions was about $10,000 to $15,000 in the overall value to the aircraft.  When setting or negotiating price, that can be a big difference on a single engine piston!  Of course, I have also had individuals say that only a “few pages” are missing from the log books or that the aircraft has no damage history when the reality was quite different thereby over rating the aircraft and leaving the buyer to find those problems. 

Improvements:  All improvements (and I include avionics, airframe/engine mods, paint and interior improvements here) need to be carefully considered.  For example, if you purchase a mod (such as a Peterson Conversion) then you need to be careful about overrating the aircraft.  This depends on the tool itself but if you add the full value of this conversion you will most likely overvalue the aircraft and in my opinion that is one reason these aircraft are excessively overpriced in the market.  In many cases, the tool presumes you have an engine already and in this example an adjustment needs to be made so that you don’t configure the aircraft with two (2) engines when it really has only one.  Adding the full value of the mod does just that.  It is also important to understand what type of overhaul you are using in the calculations.  New engines versus engines overhauled to FAA limits or new limits versus factory remanufactured engines all carry different values.  Most tools don’t really address these variables.  I was examining a Twin Otter several years ago and it had a mod applied that changed the engines.  In this particular case the loan had gone into default and the bank wanted to understand their collateral position (it wasn’t good).  In any event, a broker who was planning on acquiring and selling the aircraft tried to convince me that the full value of the mod need to be factored in.  On a turbo prop that type of reasoning can overvalue the aircraft by about $500,000 or more.  We swapped a few “pleasantries” but I would not budge from my reasoning because I understood the tool I was using and felt very comfortable with my results.  The last I heard was that this dealer still has the aircraft for sale several years after taking possession.  The aircraft’s price was greatly inflated (several times the appraised value) with no real justification.  I guess no one else believes his logic either!

Another problem area is avionics.  Avionics can be as much as 30% of an aircraft’s value and it is important to understand what is on board.  Some of the tools simply want to know if you have a GPS installed or not.  Let’s face it, there is a huge difference in value between a Garmin 530 with WAAS and an older KLN – 89B but the tools don’t seem to take this into account.  Of course be aware that even though you just installed that new technology it is now considered “used” and has depreciated in value.  Don’t expect to get retail price plus installation value. 

The Tool Itself:  I don’t see this as much as I used to but some tools tended to double count improvements but in many cases this is not really clear.  For example, the tool would start with a specific avionics configuration and simply ask you to check boxes for improvements or additions.  There was no way to remove things in the tool so you may not be sure how the aircraft is being configured.  The tool itself doesn’t know that you replaced a Nav/Com with a GPS/Com or that you removed one of its “default” pieces of equipment or that the mod you added also included a new engine or a new prop.  The result was that the aircraft became equipped with four (4) Nav/Coms when it really had only two.  These types of errors lead to a highly inflated aircraft value for no real reason.

Perform a “Sanity Check”:  When you arrive at the final result from the tool – any tool, look to see how this figure falls in the overall marketplace.  This can be a little difficult because actual sales figures are not always available and asking prices are typically inflated.  This is one reason I like the NAAA (National Aircraft Appraisers Association) evaluator tool on Trade – A –Plane’s website.  It provides a high and low figure for estimated selling prices (or market value) and allows for a variety of factors to be considered.  It also provides guidelines for the rating system being used.  If you perform an analysis and the aircraft falls way above the midpoint in that range you should be asking – “why?”.  To reach the higher end of the range the aircraft has to typically have below average airframe time, above average avionics, interior, and paint plus an engine that is well below mid-time since new or overhauled.  If your aircraft does not fall into that criteria then you have misrepresented the aircraft in some fashion and you need to rethink your parameters.  Otherwise, it is valued incorrectly.  Also, be objective in your ratings to avoid misrepresenting the aircraft.

The bottom line is to clearly understand the tool you are using and don’t just start plugging numbers into a form hoping that the tool spits out the right answer.  In the end, the marketplace will dictate the value of your aircraft.  The real key is to understand the marketplace and the position that your aircraft holds within it.

Good luck.

-Mike Simmons is a member of the National Aircraft Appraisers Association (NAAA) and holds the rating of Certified Senior Aircraft Appraiser with USPAP Endorsement – the highest attainable within the NAAA.  He joined the NAAA in 1992 and has appraised hundreds of aircraft including piston singles, business jets and helicopters.  He can be reached through his website at www.planedata.com or by calling him directly at 800-895-1382.