News and Tips on structured settlement transfers.

Sellers

29
Jan 11

Spotting a Raw Deal

The idea of trading in your structured settlement for quick cash is enticing but can be full of pitfalls. Should any of the following warning signs appear while you’re negotiating the sale, it may be time to back off.

Your first and only offer. If you’re desperate for cash, it’s tempting to jump at the first offer you get. But if you haven’t taken the time to shop around, do it now. A site like QuoteMeAPrice allows you to put the details of your settlement out there and see what buyers are willing to pay. And there’s another reason not to jump too soon: buyers will often float a low offer first in the hope that you’ll bite. If you take your time, they might just advance a better offer rather than let you walk away.

“Don’t Worry About it.” If the offer you get is skimpy on the details, or there is anything in a document you don’t understand, ask for more information. If the prospective buyer of your structured settlement hesitates to tell you , gives you an explanation that doesn’t make sense, or just tells you that everything’s fine and you shouldn’t worry, worry! You should back out of the offer altogether, or go over the documents with your attorney to hash out your concerns.

Just a Few Tweaks. A frequent complaint lodged against structured settlement buyers is that the final deal differed from the initial offer. Beware revised agreements that the buyer says has been “tweaked,” or contains “minor” differences. The buyer may be reducing your offer by changing the discount rate, or he may be trying to sneak in additional fees that weren’t part of the deal. Again, don’t let your need for cash motivate you to sign something you don’t understand – you’ll only regret it later.

Pressure. There seem to be more and more buyers of structured settlements out there. Why? Buying your settlement promises them a virtually guaranteed stream of payments, and a rate of return far better than most conventional investments. As a result, competition is high and so is the desire for results. Structured settlement buyers know that, in this economy, many sellers are under pressure for fast cash to stave off foreclosure or cover unexpected expenses. If a prospective buyer seems to be hounding you to accept his deal, is threatening to withdraw it if you don’t sign right away, or keeps pressuring you to accept changes to the original deal, walk away.

Most states allow for a “cooling off” period in all structured settlement sales, and many require you to seek legal or financial advice before selling. All of these will help you spot a bad deal and back out if necessary. But in the end, you are your most passionate advocate. If it just doesn’t feel right, take a step back and reconsider.

If you need help selling your structured settlement, annuity or lottery payments,
contact us today. We are here to answer your questions and help you obtain the
highest possible price for your payments.

28
Jan 11

Structured Settlement Concepts – Factoring

When you sell all or part of your structured settlement for cash, this transaction has an official name: A structured settlement factoring transaction.

Factoring can occur in lots of business situations. For example, a business might sell its accounts receivable to a factor in order to get cash now, instead of waiting to collect from its customers. But for purposes of this article, we’ll stick to the factoring of structured settlements.

A factor is a person or company who agrees to buy all or part of your structured settlement in exchange for cash. You get the cash you want now; the factor, on the other hand, gets a virtually assured stream of future payments that will total far more than the cash he gave to you. So the factor stands to make a huge rate of return on the settlement you have sold to him.

A factor decides the amount he’ll give you by applying a discount rate to your settlement. The factor considers his desired profit margin; the costs he incurs as part of doing business; and the cost of borrowing the cash he used to pay you, in order to figure the discount rate. This is essentially interest in reverse; instead of paying you to borrow your cash, you are giving up a percentage of your settlement in order to get cash earlier than scheduled.

The most important quality in choosing a company to buy your structured settlement is reputability. Get competing bids from QMAP and check the companies making them. Do they have numerous complaints from the Better Business Bureau? Or, by contrast, do you seem hard pressed to find any information about them at all, as if they recently got into the structured settlement business? You want to make sure your company exists and will be able to come through with a payment when the sale of your settlement closes. Some sellers of structured settlements have been burned by companies who didn’t pay up when the settlement deal closed.

A structured settlement factoring transaction follows a process governed by the laws of your state. Virtually all states require you to get legal and/or financial advice prior to selling, and you may be asked to justify in court why you want to sell. Be prepared to wait at least 45 days. Most importantly, realize that the factor is not your friend. He is not interested in making sure you get a fair price for your settlement, or in making sure that selling is the right thing for you to do. Ultimately, you, and no one else, are on your side. Read every document you get from the factor. Ask your lawyer or financial advisor anything you don’t understand. Be on the lookout for any subsequent change to the structured settlement sales deal you initially agreed to.

26
Jan 11

Why Wouldn’t I Sell?

It seems like a no-brainer. You’ve got this structured settlement that you were awarded as part of a personal injury lawsuit. Sure, you get regular payments, but you have to wait to get all the money that you’re due.

And then you see an ad from a company that promises fast cash to sell your annuity. You think about all you could do with a big lump sum of cash. Couldn’t you do so much more with the money now, other than waiting around for it? Why wouldn’t you sell?

You’re Going To Need It. If you were, say, 200 years old, and don’t think you’re long for this world, selling might make sense. But the whole point of making you wait for annuity payments is to make sure you don’t spend it all. If you were injured, especially if you’re now unable to work, the annuity is designed to ensure that money will be available to meet your medical and living expenses. Otherwise, you just don’t know what’s coming next.

You’re A Spendthrift. How many times have you seen a news story about some rocker or movie star who has racked up millions overnight and spent them even quicker? With all that money, you’d think they could hire an army of financial advisors to monitor their cash flow.

You don’t have millions. If any money you get seems to burn a hole in your pocket, if you’re easily seduced by ads of fancy cars or jewelry, or if you’re given to impulse buying (and lot’s of buyers’ remorse), think twice before selling your annuity. The annuity was meant to protect you – not just from creditors or medical bills, but from yourself.

You Don’t Have a Good Plan. What do you plan to do with the money you get from your structured settlement? You should already know that you will net far less in a sale than you would have gotten over time, and you won’t get anywhere near the amount of your original settlement.

Are you planning to pay off debts? If so, will the proceeds from your sale take care of your debts once and for all? Or will you still have bills to pay? Is there no other way to restructure or pay off what you owe?

Are you planning to fund a business? If so, how solid is your plan? Is this an established industry, or something new, exciting…and really risky? Even no-fail businesses do. And when you lose, how will you make ends meet?

Are you planning to invest elsewhere? If so, do the guaranteed returns on this investment beat the discount rate (the reverse interest rate you are being charged to get your cash now)? If not, this is probably a loser. The higher the investment return, the higher your risk.

Annuities are meant to protect you and meet your needs for many years to come. If it disappears, how will you manage? If you can’t answer that question definitively, you probably shouldn’t sell.

23
Jan 11

Who Wants Your Annuity?

Someone who has a structured settlement and is considering a sale of it may wonder who would want to buy. And why?

The purchase of structured settlements as an investment opportunity is getting more play in the media. It’s new (not really)! It’s different (well, OK)! It gives a great return (correct)! The allure is understandable: for an up-front infusion of cash, an investor can take over an existing stream of payments. Because structured settlement buyers use a discount rate to figure how much they’ll pay, they can control their profits – and rate of return. With discount rates often in the double digits, the return on a structured settlement can easily beat any stock or bond available in today’s markets.

The current recessionary economy has also created a boon for settlement buyers. With the economic downturn, structured settlement annuitants are highly motivated to sell. They need cash to pay medical bills, to survive unemployment, or to hold off foreclosure. The more desperate the seller, the more likely they’ll accept a highly discounted settlement, and take the deal fast.

Another reason investors love structured settlements: security. Most annuities are created when a lawsuit defendant takes a lump sum to an insurance company and purchases it. The insurance company is able to invest that cash and earn enough interest to make the payment stream to the plaintiff. These investments are locked in, and usually protected. As a result, the payment stream is relatively secure. As long as the insurer stays in business, the payment stream is a certainty. The only thing the buyer has to do is sit and wait.

But getting into this business can be tough. Of course, you’ll need access to cash in order to make those initial purchases. You’ll also need a reserve of cash to meet operating expenses while you’re waiting for those first settlement payments to come in. You’ll need help navigating the regulatory environment surrounding the sales of structured settlements. All states have a strict process and timeline for sales, and all of them include a “cooling off” period in which the seller could change his mind. You might invest a lot of time and resources into a purchase, only to have the seller back out at the last minute.

Finally, there are a number of very big players in the market who do a high volume of structured settlement buys. In order to get noticed in a bidding environment like QMAP, you’ll have to make your bid stand out – this may mean taking a lower profit.

21
Jan 11

Why a FA is an Annuitant’s Best Friend

So, you’re thinking about selling that structured settlement. Hoping to get a big cash payout. Got big plans for that money. So, what next?

Your state may require you to consult with an attorney and/or financial advisor (FA) before you finalize the sale of your settlement. Even if it doesn’t, finding some good advice is a great idea, even if it costs you a few bucks.

What am I really getting? A good financial advisor can look at the details of the deals being offered to your by competing buyers (if you haven’t shopped your annuity to more than one buyer, do it now – QMAP offers a free and easy way to get competing bids) to give you a good idea which one is best for you.

Should I Sell at All? A financial advisor will ask you about the reasons why you’re looking to sell your settlement. A good FA will try to find alternatives to selling. Remember that an annuity is designed to ensure you can cover your expenses for a fixed period of time, so you should be sure you’ve exhausted all other possibilities before you sell. A good FA might find something that you haven’t yet considered.

Dirty Tricks. When you seek out a financial advisor for help, find one who’s had recent experience in selling structured settlements. Chances are, he’s seen what buyers try to do to bump up their profits: change the deal midstream; introduce new “processing,” “legal,” “administrative” fees; or something similar. The buyer’s costs should be met as part of the deal, so if you’re asked to pay in additional fees, consider this a red flag.

Details of the Deal. A financial advisor can look at what’s being offered to you, and figure out how you’ll really come out in the end. The discount rate is what buyers use to scale back the total amount of your annuity and figure out what they’re willing to pay. A good FA can figure competing discount rates. The lowest discount rate – although it means the best lump sum payment for your annuity – can be a sign of trouble if the prospective buyer tends to float a favorable offer, only to pull it back later.

Who Are You? Still, don’t just trust anyone who hangs a “Financial Advisor” shingle outside his door. All those letters after his name should mean something, and a few quick Internet searches will tell you what. Ask him specifically about his experience with structured settlements, and find out how recently he’s handled one.

20
Jan 11

Dude, Where’s My Money?

If you’ve decided to sell your structured settlement for a lump sum, you’ve hopefully shopped it around to several buyers (if you haven’t, QMAP offers a fast and easy way to do this – try it now!). You may have noticed that the amounts being offered you are less than the total of your settlement. Why so much less?

The answer is simple: the discount rate.

A discount rate is a percentage that a buyer of a structured settlement uses to figure how much your settlement is worth now. Think of it as interest in reverse: when you borrow money, you pay the lender interest for the privilege of allowing you to use his money. When you sell a structured settlement, you are paying the buyer for the privilege of getting an up-front cash payment.

This may seem unfair, but put yourself in the buyer’s shoes. You are compensating the buyer for many things. Of course, he’s in business to make a profit. But on top of that, he has operating costs: office rent, utilities, a support staff, legal fees, and all of the overhead that goes into running a business. If he doesn’t have the cash on hand to buy your structured settlement, he has to get it somewhere, and pay interest on it. Even if he has the cash available, by giving it to you he loses the ability to earn interest on it himself.

Most importantly, because the stream of payments is not accessible to the buyer right away, you are compensating him for having to wait until the payments become available. After all, money now is worth more than money you will get at some later date.

Opinions differ on what a “reasonable” discount rate should be. In a 2010 New York court case, the judge evaluating the sale of a structured settlement criticized a 20% discount rate. Other experts set a range of percentages. The best way to determine whether your discount rate is fair is to look at all the offers you’re getting for your settlement. If one buyer’s discount rate is far higher than all the others, they should be removed from consideration unless they have lots of other good qualities. If one buyer’s discount rate is far lower, this is a red flag, too; buyers will often float a generous bid in order to get your initial commitment, only to change the terms or add additional fees later on.

If possible – and some states require it – find a lawyer or financial advisor who has handled structured settlement sales recently. See if what you’re being offered is consistent with recent events in the marketplace. This is a great way to make sure you’re getting the best possible deal.

12
Jan 11

Why It Pays to Shop Your Structured Settlement

You’ve got a structured settlement and you’re ready to sell it for cash now. You’ve found a willing buyer and the offer’s not bad. So, why not go right ahead?

Like buying a house, a car, or making any other major financial decision, you should always compare your options if you’re looking to sell your settlement.

The main reason should be obvious: making sure you’re getting the absolute best offer for your settlement. If a prospective seller knows he has no competition, there’s no reason for him to offer you more. A site like QMAP is great for putting the details of your settlement out there, and letting prospective buyers come to you. Since they know they’re competing with other players in the market, they’ll make offers that are worth your while.

Another reason, though, is to let you compare the details of every deal. The discount rate buyers are using will affect the lump sum you’ll get for your sale. You’ll also be able to see whether any of the buyers are trying to charge you additional fees that will cut down on the total amount you’ll receive. You can also compare the time frames in which the buyers plan to complete the transaction. Typically, a sale will take some 45-60 days to close if all goes smoothly, but companies can vary.

Sometimes a prospective settlement buyer will float a lowball offer in hopes of getting you to bite. If you shop around, however, you have the option to turn him down and go elsewhere. Once rejected, that prospective buyer may come back with something even better. Remember, though, that you should never disclose details of offers you’ve received to other prospective buyer.

Having a sampling of prospective buyers to choose from also gives you the option to check the reputations of each of them. Checking the Better Business Bureau will let you see if the company has any complaints against them. Even if a buyer has offered you the most money, if they’ve racked up loads of complaints, reconsider using them. Disappointed sellers may have complained that the transaction took longer than promised, that buyers charged hefty or hidden fees, or that buyers changed the terms of the deal midstream.

One final reason to have a list of prospective buyers: things can change. Sometimes a prospective buyer will make an offer only to retract it before closing the deal. If this happens, you’ll essentially have a Plan B in the form of other willing buyers.

2
Jan 11

Selling Your Structured Settlement – The Process

The details of the various steps of a structured settlement factoring transaction can vary a little by state, but generally the process looks like this.

First, shop around. Decide how many payments of your settlement you want to sell and get offers. Always shop your annuities to several companies. A site like QMAP makes this process very easy. It’s important not to disclose details of competing offers to the different companies you’re comparing. Also, check the reputability of the companies you’re considering. The Better Business Bureau is a great resource; if you see lots of complaints against a prospective company, reconsider.

Once you’ve signaled your acceptance of an offer, you will have to prove that the payments you’re selling are legitimate by providing a copy of your annuity policy or other supporting documents. The seller will then send you documents that spell out the terms of their purchase for you to sign. At this point, if you haven’t already done so, it is strongly recommended that you seek legal and financial advice regarding this transaction; some states even require it. Even after you accept the offer and sign all the documents, your state will likely require you to wait out a “cooling off” period during which you can change your mind.

At this point, the transaction will have to be approved by a court. Depending on your state, you may have to appear before a judge. The judge will look at the terms of the deal, especially the discount rate used to reduce the future payments you’re selling to the lump sum you will receive. Also be prepared to substantiate the reason for selling your structured settlement, such as medical or educational expenses, legal expenses, or repayment of debt.

The court-approved transaction will be forwarded to the insurance company to document the sale of your settlement. The buyer will then advance your funds to you.

The entire process will take somewhere around 45 to 60 days, depending on the state where you live. When checking the reputability of prospective buyers, you may find complaints that the buyer took longer to process the transaction than promised, and beware that some unscrupulous companies will drag their feet. Also, at each step of the process, re-check the terms of the agreement to ensure that the seller has not changed the amount of the payment or added in any fees – this is another common complaint against buyers.

Remember that selling your settlement is a very serious decision and shouldn’t be rushed. Give serious consideration to whether this is your best option.

30
Dec 10

Why Companies Purchase Structured Settlements

If you’ve got a structured settlement as the result of a lawsuit, or winning the lottery, you may be visiting a site like QMAP to consider the possibility of selling it for up-front quick cash. But what motivates the companies that buy the settlements?

Investment Return. The most compelling reason for a company or investor to get into the structured settlement purchasing business is the potential for huge returns on their investment. Consider that these companies buy all, or part, of the stream of payments you have been guaranteed for just pennies on the dollar. The goal for the purchaser, of course, is to get that lump-sum payment as low as the buyer will accept. The result can be returns substantially greater than any investment on the market.

Security. Once the structured settlement sale has been agreed to and approved, the buyer is virtually assured to get the stream of payments he has purchased. Most structured settlement annuities that result from lawsuits have been set up or purchased through insurance companies, so as long as the insurer is creditworthy and likely to stay in business, there is virtually no risk to the purchaser that he won’t get his cash flow later. Installment payments for lotteries, paid by the government, are even more secure.

Fees. In addition to the return on investment that the purchaser will receive, they can also cover their upfront costs by charging a fee as part of the structured settlement sales transaction.

Getting into the Business. Of course, the purchaser of the structured settlement has a pretty full plate. To get into the business of purchasing structured settlements, the company must have quick access to cash. If the settlement purchaser does not have the cash on hand, he must somehow secure it elsewhere – this means a cash advance on which he will have to pay interest. He’ll likely also incur legal fees getting help with the purchase contract, navigating the court system, etc. There will be overhead, too – office staff, communication costs, and so on. All of this is a substantial up-front investment for a new company in the structured settlement business.

The sale of a structured settlement will have to be approved by the court. Because the court and the seller will want to check the structured settlement buyer’s reputation, it may be difficult for a start-up to compete with bigger, established names. Also, if there has already been substantial work put into finding the seller, figuring up an offering price, and drafting the sales contract, only to have the court refuse to approve the sale, those costs are sunk. Still, even one successful purchase of a structured settlement can cover of that and make an immediate profit.

21
Dec 10

Selling a Business Note

If you owned a business and sold it, the purchaser may have given you some cash and a note for the balance. If you’d rather not wait for payments and want to sell that note now, you can exchange some or all of the future payments in exchange for a lump sum up front. Like a sale of a structured settlement or lottery award, you will receive less in total than you would have over time, but if you need cash right away, this may be a good option.

When considering what your business note might be worth, prospective buyers consider many factors, including the following:

Note Terms. The longer the term of your note, the less it is likely to be worth to a purchaser; they don’t like to wait for their cash, either. Five years (60 months) appears to be a rule of thumb, investors don’t like to see longer terms than this.

Interest Rate. Of course, prospective buyers stand to make more money on a note with a higher interest rate, and will pay more for it.

Down Payment. A larger down payment made when the buyer purchased your business indicates a stronger business and a more creditworthy note payor.

Business Characteristics: Is this business in a growing field? How established is it? How strong is its client base? How have sales been lately?

Assets. The business is the collateral for the note, but what does the business own? Does it have strong financials, a good cash balance, and valuable underlying assets?

Liabilities. The prospective buyer is certain to check for other potential claims against the business, such as loans, lawsuits, or tax liens.

Seasoning. Investors often like to see that one or two payments have already been made against the note; this is referred to as “seasoning.” A successful payment history suggests that default is less likely in the future.

Should you enter into an agreement to sell your note, you’ll need to assemble documents for the buyer.

Notes and Contracts: You’ll need the actual promissory note you received, and the contract for the sale of the business.

Security Agreement: This is the contract that demonstrates your interest in the business itself if the payments aren’t made on the note – in other words, it proves your collateral.

Proof of payments made on the note to date.

Financial statements and/or tax returns for the business.

This is a short list, of course, and you may be asked for much more. Bottom line is, the prospective buyer will want lots of assurance as to the strength of the note.

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