Pre-buy inspection fees

[SMO]

I heard a story today regarding a pre-buy inspection fee structure that was somewhat disturbing. This involved a pre-buy on an RV where the inspector charged a fee for the inspection (all well and good) and then added that he also would charge 40% of any savings off the purchase price where the reduction was due to his findings during the pre-buy inspection.

The question is: Is this common practice for pre-buy inspections??

I know I would not accept such an arrangement as a buyer contracting for a pre-buy inspection, nor would I allow an inspection on my airplane from an inspector known to participate in this practice.

I think the reasons are obvious, but here are my concerns:

As the seller: The inspector is significantly incented to find problems with my airplane, be they valid or not, and would be inclined to produce a negative report if I refused to negotiate a reduced price.

As the buyer: I could very well pass up a good aircraft based on the inspector's report. The inspector would be tempted to encourage me to buy an aircraft that needed work, where he was able to negotiate a reduced price.

I believe the inspector should be compensated in a way that would produce an independent unbiased report, and the above fee structure doesn't smell like that would be the result. However perhaps I am naive about how these things work - I would be interested in others opinions.

[istrumit]

Originally Posted by SMO

I heard a story today regarding a pre-buy inspection fee structure that was somewhat disturbing. This involved a pre-buy on an RV where the inspector charged a fee for the inspection (all well and good) and then added that he also would charge 40% of any savings off the purchase price where the reduction was due to his findings during the pre-buy inspection.

The question is: Is this common practice for pre-buy inspections??

FWIW...I had three pre-buys done on three different RV-10s

All were good and thorough. I think the first was $300 and the 2nd two were $500.

In none of those cases did anyone structure it other than a flat fee.

[DonFromTX]

On top of that a "prebuy inspection" has no defined limits. It goes from peeking thru the hangar doors and counting the wings, to a full blown annual condition inspection.
Personally I would never want to be involved in anything like you described.

[RKellogg]

Its an issue of trust. Years ago I paid for a pre-buy, and later found out that the inspector was friend of seller. Oops.

He who pays the piper gets to call the tune. Usually.

Roger

[DaAV8R]

Originally Posted by SMO

I heard a story today regarding a pre-buy inspection fee structure that was somewhat disturbing. This involved a pre-buy on an RV where the inspector charged a fee for the inspection (all well and good) and then added that he also would charge 40% of any savings off the purchase price where the reduction was due to his findings during the pre-buy inspection.

The question is: Is this common practice for pre-buy inspections??

I know I would not accept such an arrangement as a buyer contracting for a pre-buy inspection, nor would I allow an inspection on my airplane from an inspector known to participate in this practice.

I think the reasons are obvious, but here are my concerns:

As the seller: The inspector is significantly incented to find problems with my airplane, be they valid or not, and would be inclined to produce a negative report if the I refused to negotiate a reduced price.

As the buyer: I could very well pass up a good aircraft based on the inspector's report. The inspector would be tempted to encourage me to buy an aircraft that needed work, where he was able to negotiate a reduced price.

I believe the inspector should be compensated in a way that would produce an independent unbiased report, and the above fee structure doesn't smell like that would be the result. However perhaps I am naive about how these things work - I would be interested in others opinions.

No........it's not a common practice in my experience. It doesn't really make sense when you thing about it. If the discrepancies identified by Mr. inspector are real they need fixed. Mr. Inspector wants the buyer to pay him 40% of the reduction in sale price but yet the squawks remain unfixed. If the squawks are real, and you paid him to fix them, you would be paying twice.

Based upon what you describe this sounds like a shady business practice and I wouldn't do business with him regardless of how many RV's he's built.

[Kyle Boatright]

I would give the guy the benefit of the doubt on it being a shady practice, but it certainly isn't a well thought out practice. You're paying for an inspection. You define what you want inspected and should pay a negotiated fee for that work.

A possible subsequent purchase and the price of that transaction is unrelated to the scope or price of the work done by the inspector.

[vic syracuse]

That's weird unless the pre-buy inspector is involved in the sale of aircraft.
I do LOTS of pre buys and only charge the inspection fee and travel, if needed. Everybody wins--- the seller finds the problems on his/her aircraft and the potential buyer gets to make an informed decision. I won't represent any aircraft or take commissions. I want to be the objective third party. Everyone ends up with a safer airplane.

This past week I saw the most noble thing happen after a prebuy. The seller was a little difficult about there needing to be a prebuy. To make a long story short, I found the usual list of items, some of which were serious airworthiness issues, and the seller paid the pre-buy inspection fee, even though the potential buyer walked away.

Vic

[DanH]

Originally Posted by SMO

I heard a story today regarding a pre-buy inspection fee structure that was somewhat disturbing. This involved a pre-buy on an RV where the inspector charged a fee for the inspection (all well and good) and then added that he also would charge 40% of any savings off the purchase price where the reduction was due to his findings during the pre-buy inspection.

So do us all a favor...who was the inspector?

[DaleB]

It just sounds to me like the inspector wants to take on the role of negotiator or broker too. Sure, there could be some conflict of interest... but in the end it all comes down to what you're comfortable with.

If I hire someone to do a prebuy, I want a completely objective report and I'll do the negotiating based on what I figure it's going to take to address any deficiencies. I would guess some people wouldn't want to do the negotiating. In this case, the guy is offering to be the inspector and the negotiator. Just depends on what you want, I guess.

If the guy doing the inspection expects a cut of a reduction in price that I negotiate based on his findings, well... tough. I'd find someone else. Ditto if he's going to insist on negotiating with the seller. But, if we can separate out the inspection from the negotiation I don't see a big problem.

[N200PF]

Originally Posted by DanH

So do us all a favor...who was the inspector?

Hi Dan -

I'm not really comfortable sharing his name as he is very well known around these parts. I just wanted to know if the whole "receiving a fee from the buyer that hired him for getting the seller to reduce his or her price" seemed normal to anyone here.

The reason I shared a little bit about the pre-buy inspector is so that everyone would know that he wasn't just a random A&P that is used to working on certified airplanes. He's more familiar with RV's than most us will ever be with many building awards and being a judge at Oshkosh.

The part that was hard for me was that the new RV buyer looking at his first airplane thought this was normal. He was SO excited to be a new owner! His passion was undeniable and I LOVE seeing people like that join our community.

Thanks, Dan...I just want to respect all those involved even if I don't necessarily agree with the methodology of this inspector.

- Peter