Posted by David Butler on December 18, 2001 at 12:41:39:
Hello John,
Awfully difficult to work through deals in a Discussion Forum, and as you might gather from previous attempts to do so in the many threads down below - one of the big problems is the many variables that have to be reviewed and analysed in order to get any kind of meaningful quote on most types of note instruments…
Rate and terms are only a tiny part of the equation. So, on a basic real estate note for example… you have a $20,000 note balance, paying down at $268.65 p/m, with 117 payments left. How much will some body pay for that note???
Here are just a few things a fellow would have to know…
How was note created? Owner Carryback Other
what type of real estate?
Location?
When sold?
Property Value?
What was Down Payment?
Payor Credit?
Lien position of Note?
1st payment made when?
Last Payment made when?
All payments current?
Depending on the answers, along with other due diligence, discount price fo that $20,000 note could range anywhere from maybe $12,000… all the way up to possibly as much as possibly $19,000. Quite a spread, I’m sure you’ll agree. And quite meaningless, if you are trying to figure out how to price the thing, right?
Unless of course, you are the only game in town, and you know the seller will take the bottom end of the range! Then you’ve hit a home run… but, until that other information is provided to an end-buyer, you won’t really know how much you can sell it for.
Structured settlements have their whole slew of similar varibables, beginning with:
what state has jurisdiction?
what are the complete terms of thes settlement agreement?
what does the annuity contract say?
who is the underwriter for the annuity?
what is the beneficiary’s economic status right now? what is beneficiary’s intermediate economic status (will he have sufficient income to live on if the payments are sold?)
what does he want or need the money for (many states severely restrict the circumstances under which these payments can be sold)?
Many, many structured settlements have clauses prohibiting assignment, and many states have set-up legislation that makes it difficult as well. Though recent state and federal cooperative legislation has tilted the field slightly back into our favor… the answers to the above questions will determine whether the deal can be done, and if so, at what price???
On the face of your deal… all things being equal, the fellow should be able to get his $50,000 for roughly somewhere between maybe as little as 80 of those monthly payments, all the way up to as much as maybe 125 or so of them.
The answers to the questions I have posed above, as well as some others that would factor into the equation, would determine a more accurate price range!
Feel free to email privately if you have some interest in doing something with the structured settlement. I may be able to help you with the auto paper as well, if the portfolios are over $100,000. Don’t know anything about them, but I do have an investor who does buy them in large lots, and he is always bugging me to find him some.
Best wishes for your success!
David P. Butler