A friend of mine stands to receive an annuity as part of an inheritance. He wants to sell it, rather than take payments over time. I have heard of businesses that buy annuities. Anyone know of any resources where I could find out more info? What kind of percentage of the full value can he expect to receive? 75%? 50%? What are the scams and pitfalls of this kind of transaction?

Thanks in advance.

Can't blame him.  I would sell to.  ATF

Tell him to be very careful selling it.  He definately needs to get wise on present and future value concepts and the tables for those can be found in most economics or finanacial management textbooks.  The companies that buy these annuities will definately be up to speed on these concepts and are what they will base the lump sum selling price on.  The formulas revolve around what his monthly/annual payments from the annuity are, current and expected future interest rates, and length of payment over years or months.  For example, an annuity that pays $1000 a year for 4 years with an expected return of 10% would only be worth $3,170 to a savvy annuity buyer.  That should be the minimum asking price at that rate.  The problem arises in that I'm sure both parties will not be able to agree on the interest rate.  The buyer will want a low one and the seller a high one.  Compromises will have to be made since none of us own a financial crystal ball that can tell us the interest rate trend over the life of the annuity.    

GovThug (sounds like code for an IRS agent), TRW is on the right track. However, there is not as much mystery nor as many pitfalls as he is indicating.

As far as enitities - yeah sure their are entities that will buy these but your friend is going to need to be selling commercial grade paper or they are going to discount the investment more heavily - b/c they are going to look to re-sell it to a private investor.

Your friend should run an ad in the local business section, or Wall Street Journal if it is an investment worthy of attracting a 'whale'. He will most likely be able to strike a better deal with some one from this arena than an entity.

Paper is a great investment - christ I have sold it many times. The big questions, 1. What does the annuity stem from? You said it was an inheritance. What are the extenuating factors? ie - what needs to be sold / done to generate the $$? 2. How long for the annuity to pay off or mature? In this case - are any of the income generators embroiled in a pending legal issue? Have all the heirs been identified? Is there a clear directive as to how the $$ is to be divided? Etc, etc 3. The appropriate discount rate is determined by factoring questions 1 & 2 along with what is a 'safe rate of return' ie - if I invested $1.00 today over the same period of time  - what is the going rate of return for a sure thing?

Like I said - no mystery to it.

Tell me the answers to questions one and two and I will tell you if I or one of my clients would be interested in it.

Thank you.