This is an interesting premise.
I’m still not clear on the benefit to the seller; he’s getting ±25% of his cash (on a $2 million sale) at closing. If he lives past 7 years he gets more cash.
Is it because the property wasn’t going to move any other way?
Presumably as the broker of the deal, you’re taking a commission– from the seller?
Most likely scenario is seller cannot readily sell and is overpriced. Upon policy maturity, the seller is getting the two mil. That number is set. But only God knows the time.
My apology for not making it clearer.
At closing, the cash going to seller is to give him the money necessary to make the premiums on the life expectancy on whom the policy is written.
There is no more cash after 7 years. The first policy my best client acquired paid off in about 9 months. The death benefit is a set amount that does not change.
In this formula, the seller is giving up interest on the money he could have earned. The million dollars does not grow. But if this were an asset that was not used personally, was costing money to own, and was not easy to sell, it may give him the benefits he needs to make the deal. If he needs the money from this property to acquire another, this scenario will not work for him. It will work in a very small percentage of transactions, but I posted this to give FReepers a creative idea for which they may someday find use. :)
Yes, I will earn a fee and those things are negotiated with the principals. In the exchange market, it is typical to be paid by the client you represent. In this case, I represent the interest of the client with the LSPs.