If you are selling an annuity or settlement or other type of asset, you should know what you are getting into. This article explains what you can expect.
If you have a settlement, pre-settlement, lottery winning, property note, anniuty, structured settlement, pension, or some such asset you are trying to sell, you will need to get your paperwork in order that states you are entitled to the worth you claim.

Gather all this information:

Total amount of settlement or note What has been paid so far What amount is left to be paid When are the payments set up – every month, every January 31? How much are you looking for? Are there any other liens on the amount? All the documentation of the case showing payment schedule, injury status, tests, note ownership, etc. Name, phone and fax numbers of your attorney Cooperation of your attorney – make sure he will agree to fill out paperwork and lien papers, if applicable.

Once you gather all this, you or your attorney will be sent forms to fill out. If the attorney does not agree to this, the funding cannot take place, unless there is no attorney needed. Once you or the attorney sends back the paperwork, often the funding can take place in 1-3 weeks. If there is already a settlement that has been awarded, it could pay out in 2-3 days total. Some annuities, lotteries, and structured settlements may take months to pay out – there is a lot of “red tape” to get through.

Expect to pay a price – it could be 15-25% per month, or per four months, or a 40% discount, or even higher discount if the situation warrants. Do not expect your entire amount. Funders need to make money in order to give you their money. They do not do funding for free. Weigh out the pros and cons of your decision – if it’s a critical need, then take the funding and learn to think of the entire amount as the amount you will get – forget about the amount you had in your mind.

If it’s non recourse funding, as in the case of pre-settlement cases, it will be more expensive. This is because you are not at risk over the amount. The entire risk is on the funder. If your case doesn’t win, you don’t pay it back. This means there is strict criteria used in selection of pre-settlement cases to fund – it must be strong enough of a case to actually win.

If you feel a commission or fee is too high, then shop around. You will either find a more reasonable resource, or find that it was within the market rates. There are a lot of “cash-flow” businesses starting out – many due to “infomercials” – these are brokers who are sent out to chase down your business. The infomercials claim to get $5000 or even up to $30,000 commissions for these brokers – meaning the amount you have to pay back is extremely high (that is the broker fee, not even the funder’s fee added in!).

In our business, we feel that when people are in need of funds, they should expect to pay, but it should not be so high that it becomes gouging. People sell their assets because they need the money, in most cases. A commission of $30,000 is outrageous, and can be talked down or used to start a bidding war. Find out how much you need to pay, and check other sources to find out if it’s within reason.

There are also blatant scams in this business. Read your paperwork over very carefully. It needs to state all the terms and conditions. Make sure there is a deadline in which you are to be paid before you sign – and get it in the contract. There was one company that out-right lied about our competition (stating that we were working as THEIR middleman, so the client would save by dealing directly with them). The client signed the papers with that company, and 7 months later has not yet been paid – and it looks like it will not be paid. It is unknown if the client signed away her control on the asset, but the danger exists.

Make sure to get all the information you can about the deal before you accept it. Shop around and get other quotes. Do not let anyone push you into a deal you are not ready for. Do not listen to hype or lies. And once you accept a deal, learn to live with it – re-align your thinking that the settlement will be at a smaller amount than what you initially expected, or that you don’t count on the entire value of your asset anymore.

About the Author

P. Roe is a funding agent who dabbles in other areas of saving money. She is a proud mom and offers parenting skills. She holds a patent and has an engineering degree, and repairs computers, builds websites and optimizes performance on the side.