I showed you how Jane, the original annuitant, decided to sell some of her payments, and how you got notified and grabbed it.
With either a call or our simple online reservation form faxed in, we lock up the deal for you.
What happens next?
Here’s the summary – read on for the details, Or Click Here to read where I detail the purchase process
- You execute a Purchase Order
- We deal with the following:
- We Deal With Court Hearing + Approval
- We Complete Legal Review
- We Fund the Seller
- We Prepare Complete Closing Book
- We Supply closing Book To You
Only after you have received the closing book documenting the complete transfer is it time to wire money and close the case.
That Was Easy! But Let’s Look At The Details:
After reserving the deal with the name and address info you want used on the payments, we get to work. As this is a “Pre Order” case, one of the unknowns is the exact purchase price and date of closing, so initially that date is estimated to close in two months. We use a discounted cash flow modeling software to calculate your expected purchase price.
Over the coming weeks, my team (at DCF Exchange, our wholesale company) works with the factoring company to make sure all the documents are complete. Also, in this example story, MetLife should split Jane’s annuity and pay 180 monthly payments of $500 to you, and $500 to Jane.
Depending on the state, it may take 30 to 60 days to get a court date.
Often, we need to wait 30 to 60 days for a court hearing on pre-order cases. Remember, you still have no risk and no money down on this purchase.
Because Jane won her settlement in the court hearing, the factoring company needs to go back to a court with jurisdiction over this case to change the terms of that settlement. The annuity is already in place and the payments are being made, so the changes simply clerical – Jane wants to split off $500 and sell it to you, and keep $500 for herself.
The court wants to be sure that Jane won’t end up on public support or welfare, and they also have a duty to ensure that Jane is not getting a bad deal and selling too low. If the factoring company is too aggressive trying to steal the payments from Jane, courts can and do deny cases. The industry, the courts, uniform state regulations, and competition help regulate and protect Jane from egregious rates.
But this is a fair and simple case, and it sails thru court and is approved. Rarely are cases not approved, but it occasionally happens.
But once we have court approval, we will speak and I’ll let you know closing is coming up.
Once the case is approved in court and the complete file is sent to us (at DCF Exchange, our wholesale company) for review. Legal review verifies all the work done by the factoring company to ensure everything is complete and that no one has any claim to the payments other than Jane.
The attorney reviews a laundry list of items that are all laid out in our Buyers Guide. And only after the review will the attorney put together a letter outlining everything they reviewed and recommend that we go ahead and fund the case.
The way you see it, it doesn’t make any sense to buy a house without buying title insurance. And likewise, it would be crazy to buy a structured settlement from a factoring company directly without getting an attorney to review the paperwork on your behalf.
Because you work with a great broker, this review is included in your purchase price and you don’t have to find the attorney who understands this business to do the review for you.
After the attorney reviews the case and issues their recommendation, a complete closing book documenting the transfer of the payments is prepared and sent to you. This book is sent to you for review, and requires just two signatures and a wire of the final purchase price. You now have this case at a 5% effective rate of return, for an investment of $63,692, and have a 15 year income stream of $500 per month.
Now, if you remember from the prior installment, Jane had her eye on a new Lexus and was looking forward to receiving $53,000. The difference between your purchase price and Jane’s sale price is the cost of the transaction.
After the factoring company’s costs and sale price, the net margin allows for factoring company profit and pays a broker commission on the sale. In the end, all parties get a fair deal.
The closing book you got to see before sending a dime to buy this case consolidates the key documents evidencing you as the irrevocable new assignee of the payments- these documents are:
1) Annuity Benefits letter showing payments
2) Court Order assigning you the payments
3) Stipulation or Acknowledgement Letter from issuer showing you as new payee
4) Amortization table of the exact payment stream
5) Legal Review
6) Irrevocable Assignment of Cash Flow
It’s important to note that there are no costs to you other than your purchase price and a minimal servicing cost, and there are no cost to Jane other than the money that she received. From start to finish, you knew exactly the payments and the discount rate you were getting, and only the final purchase price was determined on the day of closing.
Along the way, you had all the information and updates on the case, and it was great to have independent legal counsel review the case for you at no additional cost to you. That extra level of security made all the difference.
In this 3 part story we see the entirety of a typical guaranteed Secondary Market Annuity transaction.
If you’re ready to see what we have available for you, simply click to see our inventory.