Latest / VREF | The Truth About the Aviation Market / The Haunted Hangar: Price-Gouging Ghouls, Zombie Listings & Money-Sucking Vampires | EP 64
Transcript
- Halloween episode 1080p: It's late. The ramp lights are buzzing. You walk into a hangar you've never been in before, and there it is under a single light. The airplane you've been looking at online for eleven months. Same tail number, same photos, same price reduced. It has been for sale so long the listing has a birthday. Behind it in the dark, something is adding up an invoice. Something else is quietly drafting a monthly charge you're going to pay for the next nine years, and somewhere an email's being written. From an address that looks exactly like your escrow agents, asking you to wire the money somewhere new. Welcome to the Haunted Hangar. Tonight we're going monster hunting. Zombie listings that diet on the market won't stop walking. Price gouging ghouls who feed on the desperate. Money-sucking vampires you invited in yourself. A werewolf that looks like a perfectly normal deal until the moon comes up, and the ghosts. Every airplane has a past, and some of them don't stay buried. Lock the hangar door and leave the lights on. Welcome to the truth about the aviation market. I'm Jason Zilberbrand. I'm president of VRF, the aircraft valuation reference for the banks, the insurance companies, and the courts that run on it. We publish the values, we do about three thousand appraisals a year, and I'm an accredited senior appraiser with the American Society appraisers. Before that I was a dealer, and I can tell you from experience that the scariest thing in a hangar has never been the dark. It's the paperwork. This is a special episode. We threw it together fast because Halloween only comes once a year, and the monsters in this business come every single day. It's a little lighter than usual, but every monster you're going to meet tonight is real. I have seen every one of them in a real deal, and by the end of the episode, you're going to have a bag of garlic and a few silver bullets to deal with each of them. Same rule as always, guys. I don't name names, and I don't name the other data sources. You'll know the monsters when you see them. So let's start with the most common monster in the business, the zombie listing. It died months ago, nobody wants it, and it will not stop walking. Here's how a zombie is born. An owner decides to sell, he goes to one of the listing sites, and right there on the page is a free little valuation widget that tells him what the airplane is worth. It's a really big number, it's a beautiful number. It's a number built from asking prices, not closings, which means it's a number built from every other owner who also wanted to sell for way too much. So, he lists it at this beautiful number, plus a little room to negotiate because everybody does that, right? And then nothing happens. Thirty days go by, sixty, ninety. He got a couple tire kickers, one buyer's broker calls, heard the price, never called him back. At day 120, the airplane is clinically dead. And that's when it rises. You know the signs. The listing gets pulled and relisted so the days on market counter resets to zero, you know, like nothing happened. The photos might be from a different season. There's snow on the ramp in the July listing. The airplane changes brokers sometimes twice, three times, and shows up under a new ad with the same description word for word, typos included, price reduced, appears five times, each one a little smaller than the last, because the owner is negotiating against himself in public. Motivated seller, bring all offers, and my personal favorite, call for price, which on a zombie means no. You won't believe it if I type it. Here's why every zombie matters to everybody, not just the guy who owns it. Zombies poison the water. Every other seller of that model looks at the zombie's asking price and thinks, that's what airplanes like his are worth. The widgets scrape it, the next ownerless hire, and the whole model develops a fever where the ass drips further and further from what anybody's actually paying for any of these aircraft. Meanwhile, there's real buyers, ones with cash. And they're quietly closing on the airplanes that were priced right at numbers the zombie owner will never see because those numbers don't get published on the listing sites. They show up in actual closings, which by the way is our job. The cure for a zombie is simple and it's brutal. Stop listening to the asking prices. Price the airplane on what it actually closes for. I say it every week, and I'll say it in a cape this week. Price it at VREf and it sells in 90 days or less. Price it off one of those widgets. And you can join the walking dead. So here's some garlic for buyers. If an airplane has been listed for a year, it isn't a bargain at a reduced price. It's telling you something. You gotta find out what. Sometimes it's just a stubborn owner, and that's an opportunity. Sometimes the airplane has a bite mark on it nobody wants to talk about. Which brings us to the ghouls. Ghouls feed on the desperate. They don't hunt, they wait. They know that sooner or later you'll be stuck in a hurry with no options. And that is when they eat. The first ghoul lives on the AOG desk. Aircraft on ground. You sitting on a ramp, somewhere you didn't plan to be, with passengers, with a part that failed, and suddenly the same part that cost one number last Tuesday costs a number with a different first digit this week. Because you gotta pay expedited fees. You gotta pay after hour fees. A core charge for a core you are never told about. Some of that is real, because getting a part across the country tonight genuinely does cost more money. Some of it though Is just a ghoul who knows you can't walk away. The second ghoul lives on the ramp. You fly into a big event, a championship game, a race weekend, a festival, the masters, and the ramp that charged a modest fee last month now has a special event fee, a security fee, a reservation fee, a minimum fuel purchase fee at a price per gallon that would make a pirate blush. And a slot you have to book weeks in advance. Every one of those fees is legal, guys. Every single one is disclosed somewhere, and every one of them knows exactly how much you want to be there. The third ghoul is the one that scares sellers the most, because it's the pre-buy squawk list. The buyer flies your airplane to a shop for the prepurchase inspection, and the shop, which you didn't choose, which you don't control, and which may be hoping to do the work afterward, produces a list. Some of it's real. Look, corrosion is absolutely real, a broken part is real. But mixed in with the real stuff are cosmetic items, often things that aren't airworthiness issues, recommended work dressed up as required, and the estimate for each item written at a number designed to leave the room. And every dollar on that list becomes a dollar the buyer wants off the price. At the closing table, when everybody is tired and the deal is almost done. Here's the silver bullet for the ghouls. Know your number before you need it. Fly with a parts list and a support plan. that covers the things that strand you. Book the event ramp early, or land at a quieter field 20 minutes away and drive. And if you're selling, get your own records review and your own squawk list done before you list it. If you already know what's wrong with your airplane and what it's going to cost to fix it, the buyer shop can't surprise you. And you get to decide whether to fix it or price it. See, the ghoul only eats when you're surprised. Alright, let's take a quick break from the monster hunt. If you own, finance, or insure an aircraft and want to know what it's worth, what it's actually worth, not what the zombie next door is asking, that's what VREF does. We publish the values, we do the appraisals, and when something goes bumping the night at the closing table, we're the ones who show up in court. So check out VREF.com. And if you're enjoying the show, hit subscribe. It's free. It doesn't bite, and it's the only thing I'll ever ask from you. Now let's move on to the vampires. And here's the thing about vampires that everybody forgets from the movies. A vampire can't come into your house unless you invite it in. See, every vampire in this segment is one you signed for. That's what makes them so darn dangerous. They don't break in, they have a contract. Vampire number one is the program that never stops drinking. Guys, I did a whole episode on engine programs. So I'm going to keep this short. A program can be a very good decision. It can also be an owner I met who Who was 11 years and over a million dollars into an hourly engine program on an airplane worth about $300,000? With the overhaul still four or five years away. Every month, a little more blood, and the bite marks don't show until you try to sell and find out the next buyer doesn't value the program the way you paid for it. About one buyer in five walks away from a program at closing, guys. Do the math before you invite it in and do it again every year. Check those hourly rates. Ask for proof that they have loner engines. Vampire number two is the management company with a long cape. See, most managers are honest and they earn their fee, but listen for signs of a vampire. fuel bought at one price and bill to you at another. Or how about maintenance marked up on the way through? Or a crew that somehow always needs a hotel in the nicest part of town. Repositioning legs you didn't know you flew, charter revenue that looks wonderful on a pitch, and somehow never shows up in the statement because the charter flights used your airplane, your hours, your wear and tear, and the expenses all landed on your side of the ledger. The vampire doesn't take it all at once. It takes a little every night, and you only notice when you're pale. Vampire number three is the subscription, the databases, the connectivity plans, the software licenses, the monthly this and annual that. Individually, they look like nothing. Together on some airplanes, They add up to the cost of a nice used car every year, and half of them auto renew on services nobody on the airplane even uses anymore. And vampire number four is the one you meet when you sell. It's called depreciation. Depreciation that you didn't plan for because you bought the airplane off an asking price instead of a closing price. That one isn't really a vampire. That one is you on the day you overpaid in the mirror. And vampires, as they don't have a reflection, so you never saw it coming. So the garlic for vampires is an annual audit. And guys, everybody should do this. Once a year, sit down with a every reoccurring charge on the aircraft, every single one, every program, every management statement line, subscriptions, and ask one question about each. If I were signing this today, would I sign it? And if the answer is no, you found your vampire. See, all you gotta do is open the curtains. The sunlight will kill them. The werewolf might be the scariest monster in this hangar. Because for 29 days a month, it looks completely normal. It's a deal, it has a buyer, a seller, a purchase agreement, and an escrow agent. It even has a closing date. Everybody's friendly. Everybody's professional. And then on one particular night, it changes. The most common werewolf in this business is the wire. Two days before closing, an email arrives. It looks exactly like it came from an escrow company. Same logo, same signature block. Same tone, maybe one letter different in the address that you probably didn't even notice. It says the bank details have changed. Here are the new wiring instructions. Please send the funds today to stay on schedule. And somebody tired, busy, trusting, send seven figures to a werewolf. Those funds are usually gone before anybody notices. The other werewolf is the one who transforms at closing. The counterparty, who was reasonable for six weeks and suddenly With the airplane on the ramp and the crew book discovers a new problem that requires a new price. They know you're committed. They know the clock is running. They just waited for the full moon. So let's talk about silver bullets. Because for the wire werewolf, never ever change wiring instructions based on an email. What you need to do is call the escrow agent at the phone number you already had. Don't use the one in the email and confirm every digit out loud. Use an escrow agent with a reputation you can check. Not the cheapest one your counterparty suggested. Not some company you've never heard of that's offshore. And for the closing table, werewolf, put everything that can be agreed in writing before the airplane moves, including how squawks get handled and what the price adjustment caps are. A werewolf can't transform and the contract already says what happens under a full moon. Alright, here's the last monster. It's the ghosts. Every airplane has a history, and some of that history doesn't want to stay in the past. There's the ghost of the missing years. I see this all the time in appraisals. A logbook that runs beautifully for decades and then just stops for three years. No entries. Nobody knows where the airplane was. Nobody knows what it did or who touched it. Maybe it was just sitting in a hanger. Or maybe it wasn't. See, a gap in the records is a gap in the value, and every buyer, every lender, every insurance company is going to ask the same question. You should be asking, which is what happened in the dark? See, there's the ghost of damage past, an incident that was repaired properly or otherwise, and isn't even mentioned in the listing. It shows up later in record searches, or in a form filled with the FAA, or in the hands of an inspector who knows what replaced skin looks like. A damage history that's disclosed and documented is a number. A damage history that was hidden is a lawsuit. And there is the saddest ghost of all. It's the orphan. An airplane whose manufacturer is gone or never really got going, so there's no factory, no parts pipeline, no support network, no second buyer. The airplane itself can be perfectly airworthy. It just doesn't have a market. We got a whole episode coming on one of these. And let's just say the mock up they showed in Las Vegas this month needed some help standing up. The way you exercise a ghost is with paper. Get the complete records. Not the last ten years. Run the title and damage history reports. Ask about gaps before they become your gaps, and ask about an appraisal that actually reads the logbooks because a value that never looked at the history is just a guess wearing a sheet. And if you're buying, selling or financing an aircraft and you want somebody to check under the bed and in the closet before you sign, call me. We read logbooks. We know what actually closes and what it actually sells for, and we've seen every monster on the list. So Go VREF it, go to VREF.com and get your value today. So here's your monster hunting kit. One more time. For zombies, price on closings, not asking prices. For ghouls, know your number before you need it. For vampires, audit every recurring charge once a year and kick out the ones you wouldn't sign today. And for those werewolves, verify every wire by phone and put the full moon clauses in writing. And for those ghosts, get the whole history. Get an appraiser who actually reads it. See, none of these monsters are supernatural. Every one of them feeds on the same thing. An owner or a buyer who didn't have good information at the moment it mattered. Guys, turn the lights on and most of them disappear. This has been the truth about the aviation market. I'm Jason Zilberbrand. I want to wish you a happy Halloween. We'll see you next week. And until then, fly safe and stay smart.