by Structured Settlement Watchdog
Is a Structured Settlement Exchange a Good Deal?
I wanted to find out so we had a mystery shopper run three deals using a calculator on the website of Crowfly LLC, a company associated with John Bair of Milestone Consulting that acts as a purported platform to match sellers with buyers/investors and in theory at least should lead to a better price. But does it?
We had our tester run the following 3 scenarios:
Scenario One
Sell monthly payments of $1,500 from 1/1/2020 through 4/1/2043
Crowfly’s calculator said that the structured settlement payments were worth $200,319. Crowfly’s estimate assumes a discount rate estimated to be 7.4% Our source, which regularly negotiates such deals, said a fair value was between $230,000 and $240,000, more than a 15-20% difference!
Scenario Two Selling deferred payments
Sell $2,000 monthly for 240 months 1/1/2030 to 12/1/2049 Crowfly’s calculator said that the structured settlement payments were worth $133,454. Crowfly’s estimate assumes a discount rate estimated to be 6.9%. Our source, which regularly negotiates such deals, said a fair value was between $150,000-$156,000 or better.
Scenario Three involved lump sum payments and there we found the structured settlement calculator to be reasonably accurate.
What we learned
- It seemed from the testing that Crowfly’s estimates are based on discount rates in the 6.9%-7.5% range depending on the type of cash flow being sold.
- Even if there are multiple bidders for structured settlement payment rights, sellers may still be able to better by shopping around themselves or hiring a negotiator. Your Mama told you that ” you better shop around” and she was right!
Bair, based out of Buffalo New York, is to be commended for coming out about his association with factoring origination (he wrote in an email to a third party on 10/4/2018 that he “was the only primary market as well as secondary market origination company that he knew of”), while others cowered in the weeds.
