In today’s fast-paced financial landscape, aircraft desktop appraisals have become an attractive shortcut for lenders and insurers alike—offering speed, simplicity, and possible savings. But when accuracy takes a back seat to ethical behavior, convenience and possibly price, these reports can become the first domino in a chain leading to possible bank fraud. Without the benefit of on-site inspections, context-rich observations, or direct verification of aircraft condition and equipment, appraisers risk being unknowingly swept into schemes where valuations are manipulated to justify questionable loans and/or collateral. This article explores the growing vulnerability created by “desktop” appraisals for aircraft and highlights the professional and ethical safeguards appraisers must employ to protect both their reputations and the industry’s integrity.
I am not an attorney and do not pretend to offer legal advice. After appraising aircraft for over 30 years, I have observed that on-site verification and thorough record reviews are crucial in determining an aircraft’s value with any degree of credibility. These steps can prevent fraudulent activities, such as artificially inflating an aircraft’s value in banking transactions. Recall that in Oklahoma, a money laundering scheme was uncovered when a reporter found that many aircraft registered at a local airport did not exist. This incident highlights how easily records can be falsified, underscoring the importance of on-site verification.
To provide clearer insight into the issue, we reference the Uniform Standards of Professional Appraisal Practice (USPAP), despite the aircraft appraisal industry being unregulated and not mandating adherence to USPAP guidelines, ethical frameworks, or Best Practices. It is important to note that the current edition of the USPAP manual does not define “desktop appraisal” nor establish reporting standards for this type of report; consequently, minimal documentation and reporting could satisfy the requirements for many financial institutions. Furthermore, USPAP does not obligate evaluators to perform a physical examination of the subject property. These circumstances can increase the risk of potential fraud, particularly when aircraft are used as collateral and banks, bankers, or appraisers may rely on information from individuals who have a financial interest in the transaction.
The entire scenario may begin with a “good customer” coming to a banker with a need to fund a specific aircraft. Most bankers can count the number of aircraft deals during their career on one hand – and those with questionable intent know this. The good customer provides the banker with all the necessary information about the collateral and that may include the title search and an “appraisal” from the broker or seller along with a Purchase Agreement showing a price of $X. The good customer may be putting pressure on the banker to close the deal quickly as other parties may be interested or the deal is about to slip away to another bank that can move faster. Therein lies part of the problem – an unrealistic and unnecessary tight timeframe. The banker then believes that whatever the good customer provided to substantiate the value is fine or bank policy may require an appraisal report with very little guidance. Bank policy may also identify an agency or appraiser to use but typically there is no requirement for a field visit leaving this up to the banker who is pressed for time and who wants to keep costs low in order to keep the good customer happy. After all, the good customer does not have to pay all these fees if he goes to a competitor. The result is that the banker hires someone without vetting them and requires that they use the aircraft information provided by someone connected to the deal and which may or may not be correct and accurate – and this is where fraud may find its way into the project and where the evaluator who signs their name to a report with fraudulent, incomplete or inaccurate details becomes a party – knowingly or not. Consider that even if the appraiser of record knowingly issues an incorrect report (regardless of the reason), there is no agency (aside from the Professional Aircraft Appraisal Organization or PAAO) that will hold them accountable to an ethical standard. In fact, the aircraft appraiser is not required to belong to any appraisal agency, take any recurrent training or have any background in aviation.
Not long ago, an appraiser with the PAAO described a project involving a bizjet. His banking client always required field visits and a review of all logbooks. When setting up the appointment for the field visit, PAAO Appraisers state what they expect to find when they arrive on-site. ALL logbooks are expected to be in order and ready for review. In this case, the listing broker wanted to know why the logbooks needed to be reviewed and seemed to push back on that request. It turned out, all logbooks were missing and this was not something that was communicated to the bank! The maintenance facility was attempting to recreate those records but, in the end, there will be several older unsigned entries or missing entries, and this will have an impact on the overall value of the aircraft. A “desktop” report may have used an extraordinary assumption that all logbooks were original and complete because they had no information indicating otherwise.
The representation of an aircraft’s damage history is another area where discrepancies may occur, as sellers, brokers, or dealers might advertise the aircraft as having no damage history when that is not the case. Several months ago, I participated in a project involving a business jet. Upon reviewing the logbooks, I identified an entry of damage. I informed my banking client—who already held a lien on the aircraft—of this finding, noting that there was no appraisal report on file from the time the loan was initiated. The bank subsequently forwarded my email to the broker, who dismissed my finding. In response, I cited the specific logbook entry detailing repairs associated with a fuselage puncture caused by a forklift incident, which also resulted in damage to the pressure vessel and subfloor structural components. I then inquired how this logbook entry should be interpreted. I did not receive a further reply. To be fair, it is possible that the broker had not thoroughly reviewed all logbook entries or conducted comprehensive research, making it easier to claim lack of knowledge rather than knowingly withholding relevant information from prospective buyers.
Many bankers become aware of their judgment errors only when a loan defaults and the aircraft must be repossessed. Others, who have not experienced losses, may assume their existing procedures are sufficient either due to an absence of issues or because their loan values are minimal. In reality, both groups face collateral challenges and varying degrees of risk exposure. The exact nature and scale of these issues often remain unclear, typically due to insufficient due diligence by both the banker and the designated aircraft appraiser in utilizing desktop reports. Nonetheless, there are strategies available to help mitigate the risk of bank fraud and associated exposure.
First, know who the appraiser is, what aircraft appraisal organization they belong to, what ethics they follow and what their qualifications are versus a focus on pricing and timing. PAAO appraisers are required to have a significant background in aviation and they must undergo a criminal background check along with training before they can offer their services to the general public.
Next, ask the appraiser how they will obtain the aircraft information from the field. PAAO appraisers will either travel to the site or ask a local PAAO appraiser to obtain the necessary information for them. The appraiser of record can specify what photos and information to gather and the digitized records can be made available. The PAAO is the only organization that trains its appraisers to routinely scan and digitize records for their workfile and report. Many aircraft evaluators with no aviation background will skip a review of ALL logbooks or only review the past few years. This is a key value point that should NOT be overlooked or glossed over.
Most aircraft appraisal reports involving a field visit can be competed in about 5 – 7 business days at a price that is competitive with those offering “desktop” aircraft appraisal reports. Some projects may take longer due to the availability of the aircraft, its records or some other issue. Most of these issues can be addressed to minimize both time and cost.
Ultimately, the decision to rely solely on desktop appraisals—driven by convenience or cost-saving measures—often comes with unintended consequences that manifest only when it is too late. True due diligence demands a multidisciplinary approach: combining financial scrutiny, technical evaluation, and a healthy skepticism regarding all information provided by interested parties.
Professionalism in the aircraft appraisal sector must be proactive, not merely reactive. It is crucial for lenders, insurers, and appraisers to foster open communication and transparency throughout every transaction. When all stakeholders insist on complete documentation, impartial third-party evaluations, and field inspections, they not only protect themselves from fraud but also elevate the standards of the entire industry.
The aviation industry’s financial health depends on the integrity of its collateral valuations, making thoroughness, transparency, and ethical rigor more valuable than any fleeting convenience a desktop report might provide.
In summary, selecting a reputable partner such as a PAAO Certified Appraiser for aircraft appraisal services can make all the difference between a well-informed decision and a costly mistake. With an emphasis on thorough documentation, adherence to ethical PAAO Best Practices, and a commitment to fieldwork rather than relying solely on unverified 3rd party assumptions, PAAO Appraisers exemplify the standards that should define the industry.