10/30/2020 2 Comments Arrival in IndiaFor me, India was an enchantment, perhaps even a romance. I had been working at First American for about five years and had learned a great deal. To my surprise, I had fit in very well and enjoyed my job and the people I worked with. By then, I oversaw our division’s operations in the United States. Six months before my first trip to India, my boss had informed me that our division was about to “go offshore”. That meant we were going to utilize the connections that First American had established over the past ten years in Manila and India to help us be more productive and profitable. I asked my boss to explain how this works, but he said the best way to understand offshore was to go there. My boss and I went to Manila first and my vision opened greatly as to what was possible utilizing well trained, intelligent people in another country. The cost was significantly less, and their work product was excellent. My boss told me, “wait till you see India.” I had dreamed of going to India since I was young. I had imagined staying at an Ashram on an extensive retreat or something like that. I would go as a pilgrim of sorts. Instead, I found myself going “business class” (that is – very luxurious), on Lufthansa Airlines with one of my colleagues (Peter) whom I liked a great deal. We were going to begin the appraisal training for our “back-office” in India. We arrived in Bangalore around 2AM. From the very first moment, something awakened in me and I was able to see the beauty in everything, including the intense chaos. While we waited to be picked up, I breathed in the smell of diesel fuel combined with Indian spices that permeated the air. There were all sorts of vehicles; cars, motor bikes and strange looking vehicles waiting for fares. It was a carnival of reality and I felt part of it. Our driver found us and within short order we were cruising through the streets of Bangalore. The streets were alive; shops were open and people were walking in a what seemed to me a dreamscape. We drove through a residential neighborhood, made a turn, and to our complete amazement entered the grounds of the Leela Palace https://www.theleela.com/en_us/. Please check the website for photos since any description does not do it justice. The hotel, which is part of a “chain” of luxury hotels, had been completed one year earlier. At the time, it was the most sought-after hotel in Bangalore, then the IT capital of India, perhaps even of the larger world also. The hotel’s design was inspired by the Mysore Palace https://www.mysorepalace.gov.in/ (which I will tell you more about in a future blog). At 3AM we arrived at the Leela and were “welcomed” in a most lovely ceremony involving blessings, rose pedals and water and then personally escorted to our individual rooms. The furniture in each of our rooms would make even an aficionado of “Antiques Roadshow” blush. Every piece, from the desk to the bureaus and armoires, were antique quality. There was also a “guard” in costume posted on each floor of the hotel for security, no doubt a throwback to the Colonial days for India. Although I could clearly see the incongruities, I had surrendered to the experience, meaning I received it far more with my heart than my head. The next day, after getting up a bit late and eating a sumptuous breakfast, we toured the 240-acre Lalbagh botanical garden, with its enormous banyan trees. Bangalore is known for its gardens and is actually called the “garden city” in India. We then walked the streets and felt the energy in a city booming with growth. Our first training session was scheduled for the evening. We had mailed our “new students” a few hundred pages of material.to study, more than we thought we would probably cover at this first week-long training. We knew we would be back for additional trainings so they could prepare ahead of time. Both Peter and I had imagined that, perhaps like many American groups, the students would read or at least skim the material. The way that real estate is handled in the U.S. is utterly different than in India so we planned to gently introduce them to how things are done in America. This would give them a good overview of how their work would fit into the larger picture. After “ice-breakers” and general introductions, we were about to dive into the material when a hand went up from the back of the room. “Excuse me, sir, my name is Ramesh. I have a question before we start if that is alright with you.” I nodded. On the material you sent, page 61 says, “…” (and he read what it said) “but the footnote on page 129 says “…” and again he read what it stated. “These two statements cannot both be right since they are contradictory.” Could you please tell us which is correct?” I said “Ramesh, you are completely correct. Did anyone else notice this or only Ramesh?” Slowly at first, one hand, then another, and finally almost all the hands went up. I took a deep breath, looked at Peter, and we both smiled. We were definitely in “another world” – a world of intense learning and disciplined study. Peter and I were both experts in appraisal and loved to teach. We both instantly realized the high quality of the group and how much we would be able to accomplish, not only in our week of training, but going forward. This insight turned out to be true in so many ways, which I will detail in following blogs.
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10/24/2020 0 Comments October 24th, 2020A Dream – My 75th Birthday
It is my 75th birthday. (I am actually 73 so it is not far off.) Catherine and I are at a renowned Italian restaurant in Boston with another couple that we like. Boston. The room is rectangular and we are seated in a cozy, quiet corner. I have arranged this small birthday celebration to be intimate and simple. We are all enjoying the delicious food and conversation when the waiter, a very nice man, comes over and asks for a favor. Could we possibly move? A large party has arrived and he wants to put our table together with another to accommodate them. I tell him that it is my birthday and I am in a particularly festive mood so why not. He is thankful and after a certain amount of confusion he moves us to a table at the other end of the room. We climb a few steps onto a platform for this table. We continue the meal and, sometime later, the waiter comes over again and tells us that it is now 7PM and this is when the music starts. We are now in the music section. Other people have paid $60 each for a cover charge and all of these table are reserved. Thus, unfortunately we will have to leave. I tell him that we have not quite finished, plus we definitely want to have some delicious cake and pastries for my birthday. I was particularly eyeing their coconut rum cake. He says he understands but there was really no choice. I am surprisingly calm and ask if I might speak to the manager. The manager comes over, a rather gruff fellow who again apologizes, but says we have to go. I say that we will go if he will make a fair accommodation. To make it easy for the manager, I tell him I will accept the following – since the bill was $200, he will give us a 50% discount and we will pay $100. Also, he will allow each person at our table to choose their favorite dessert. He will then package each one separately so we can take the desserts home. Our tip will be based on the original whole amount of the bill because we feel that the waiter was caught in the middle and has done his job. The manager then becomes somewhat threatening, and yet I am still really calm. Catherine and our friends recommend we leave, laugh it off and make it part of the story. I tell them that this is surely an option but I prefer to utilize this opportunity as a learning experience for all parties including myself. As the manager becomes more menacing, I tell him that although he believes that he has all the leverage, that is not really the case. I take out my cell phone and tell him that if he continues in a threatening way, I will call 911. The police will then come to the restaurant and the headline might be “fancy restaurant ruins 75th birthday party”. The manager leaves and soon returns with another man of an utterly different quality. He emanates intelligence and warmth even as he walks towards us. He politely asks if he might pull up a chair and sit with us for a few moments. He properly introduces himself to all of us and lets us know that he is the owner. I am relaxed and taking all this in. He asks for my understanding of the situation which I provide including my proposal. He listens carefully, takes a moment, and says that my proposal is very fair and he accepts. He then instructs everyone to “please make it happen.” The owner then leaves. As we wait for the desserts and the check, the owner returns with a bottle of high-quality wine. The owner presents it to me and with complete sincerity says “Happy Birthday.” I thank him. He says, “one more thing.” He gives me his card and asks if I would contact him because he has something that he wants to discuss. Next Scene – The owner and I are seated at his elegant antique desk in his spacious office with mahogany paneling and several beautifully displayed sculptures. The same calmness and quiet that had surrounded him in the restaurant are still present. He explains that he owns eight elegant restaurants in the U.S. He is concerned that his managers do not really know how to deal with customers, especially seniors. Most of their customers are younger. He asks if I would consider helping him take on the task of training the managers to improve their listening abilities, as well as understanding their customer’s point of view. He says he wants to expand his businesses so that seniors feel comfortable coming. He says that he will pay me fairly for the work. We discuss how to pay and agree that billing by the hour is best. How much do you charge an hour? he asks. I say that I don’t know because I have been “retired” from the business world for many years. I ask, “what would have to pay a highly qualified consultant to do the job you have outlined.” He says “$500 an hour”. I say, “OK, then $200 an hour will be fine.” He indicates that he is glad to pay more and wonders why I suggest less. I respond, “It was that lovely bottle of wine”. He smiles. I smile. And I wake up, smiling. 10/19/2020 0 Comments Becoming First American 2 of 2 Being Purchased In 1995, First American Financial, the parent company to all things First American bought a large financial company with many divisions, one of which was a national appraisal management company. This was the start of First American Appraisal. First American felt that their new appraisal company needed more stability so they also bought a small California company and invited us to consider being purchased. Their goal was to merge us all together. From the time they invited us to the time we agreed in 1997 (two years later), I was in conflict about the decision. Steve, my partner and actually the major legal owner of our company was also ambivalent. On the “yes” side of the decision, both Steve and I were clear that the lending market was consolidating. We believed that, within a few years, there would be only ten or less major lenders doing the majority of residential lending in the United States. This turned out to be true. These large lenders only wanted to work with large appraisal management companies and we way were too small. A second important consideration was that there were better opportunities for our employees, opportunities that we could not offer. Due to our structure there was limited room for advancement. This had already caused some excellent people to leave and start their own appraisal companies. For me personally, there was the potential of financial stability with the possibility of thinking about a financial plan for “retirement.” On the “no” side, I had many biases against large corporations. I was a product of the 1960s hippy generation (I actually was at Woodstock) and my take was that large corporations were not good places to work. I was fearful about the regimentation as well as losing the joy of being in control of our business. I talked with many people and received mixed messages. Some saw it as a great opportunity. Others told me that I would not like it at all, and probably would not survive corporate regimentation. As we approached 1997, it was clear that we had to make a decision. It had taken almost a year to get the company ready legally to be purchased with ownership issues etc. We visited First American in California and were impressed by the quality of the people we met. We also really saw how small we were compared to a $12 billion corporation. I had already developed the ability to invite “inner consultants” to advise me with my challenges. I found and still find this to be a very useful approach to tuning into the deeper wisdom in myself. Then, a truly surprising thing happened. My dad, who had died ten years before, started appearing in my dreams. It was even possible to “talk” with him during waking hours. We had a wonderful relationship when I was young and I knew he was now here to help. He reminded me that at one point in his life he was in a similar situation. He and his business partner had started a sweater manufacturing company in the late 1940s. Through creativity, hard work, and luck, they had grown their company from a “thought” to owning two manufacturing plants, one in the Bronx, where he worked, and a second in North Carolina. They employed over 200 people. He had made a good living throughout my childhood. He and my mom had simple tastes and lived in the same two-bedroom apartment in Queens all their married life. However, most of the “savings” were put back into the business. Somewhere in the 1970s, it became clear that Taiwan could outcompete him on price. A much larger company in his industry offered to buy him out. The idea of his giving up control of his “baby” was too much for him and he said No. Three years later, his company went bankrupt and within a few years he developed a brain tumor, no doubt influenced by stress and his deep sense of loss and failure. He tried to rally after that but the joy in his life was never quite the same. He died at 69 from cancer. It was not a good ending. My dad knew what I cared about. During our “visits, he reminded me that life is an adventure. He pointed out that we never know how much time we have left and how things will play out. His take was that this opportunity, with all the possible negatives, might hold remarkable surprises and it might be a great gift. Maybe not, but no way to know if I didn’t try. And then he told me that his saying “No” was, by far, the worst decision he ever made. That struck my heart and I told Steve that I was all in if he was. We sold our company to First American hoping that it would be a good decision for ourselves and many others. Although my dad has “visited” throughout the years, the clarity of these encounters was never repeated. Perhaps the intensity of my struggle was what allowed this connection to occur. Thus, in 1997, when I turned 50, I felt that I had set off on a new voyage into the unknown. 10/13/2020 2 Comments Becoming First American 1 of 2First Meeting In 1994, the U.S. Congress passed The Flood Insurance Reform Act. The law required that lenders determine the need for flood insurance and ensure that the coverage stays in force for the life of the loan. That such an innocent and irrelevant sounding law would have an enormous impact on my life is surprising but true. This law spawned a number of entrepreneurial companies wishing to offer this service to lenders. The companies utilized electronics as much as possible to determine if the property was in a flood zone as well as track the insurance for the life of the loan. These flood certification companies also backed up their certifications with an errors and omissions policy, and would reimburse the lender if they were wrong and there was a financial loss. Until this time, appraisers were required to make their best-efforts using FEMA flood maps to determine if a house was in a flood zone. This was not always possible because the exact location of the property could not always be located on the flood map. Sometimes, appraisers would report “could not determine”. Some of our lenders asked us if we could help solve this problem for them. What they wanted was the flood certification (a piece of paper) attached to the appraisal. They would pay us a reasonable fee. At that time, our company was no longer in survival mode and we had stabilized. As Yoga teaching recommends, we were breathing more from our belly. After dogged effort, we found a small flood certification company from Texas that agreed to work with us. They would do the research and send us the flood cert electronically, and we could bundle it with our appraisal. Our clients were pleased and after a few months of working out the kinks, we decided to expand this line of business. We paid for a vendor’s table at a very small bankers convention in New Hampshire and set up our information. The vendor at the abutting table was called First American Title / Lenders Advantage. They were also selling Flood Certifications. In fact, they were using the exact same flood certification company as us. Interesting coincidence, we thought. My partner, Steve, and I got to know our “neighbors” throughout the day and found out that First American Title is part of a multi-billion-dollar corporation called First American Financial. The corporation had begun to branch out from their title business over the past five years. Their mantra was “from cradle to grave,” and wished to offer every product needed to service a mortgage loan. The challenge for the title office in Boston was that they did not have relationships with lenders, only attorneys, because, in Massachusetts, only lawyers do titles. We told them that our lenders really wanted a bundled package of appraisal and flood cert. They informed us they had a significant advantage over us. Two days before they had purchased the flood certification company and now had complete control over it. And then, to our surprise, they invited us to meet their boss in Boston. They had talked to their boss on the phone who thought there might be a synergistic way to work together. Three weeks later we drove to Boston. Their office was located on the 16th floor of an elegant building near the financial district. We met their management team in a beautiful conference room overlooking the Boston skyline. We did not have a clear expectation. We came to listen. As each person on the management team explained their role, we began to get a picture of a very well-run business with cordial and dedicated people. We wondered out loud how we might work together, what each of us had to offer the other, and why this might be a good fit. I instantly liked their head of operations, Rhonda, a woman both candid and warm at the same time. Little by little each of the team members left the room and the only people left were Rhonda, Steve and I. We laughed and asked her “Is it something we said?’ “Oh, no, she answered, “this is when we discuss the details of the deal including the money. Then I asked “may I make a recommendation?” “Go ahead, I’m listening.” “Since it is clear you are in charge, I suggest that you decide the details. The important thing is that both of us feel that we got a great deal. If you can do this, then I believe we will simply say yes.” Steve concurred. She was quiet for a moment and laid out a deal that was so good for us that we told her that she was giving too much. She said that what they were giving us was easy for them. What they wanted was the relationships with the lenders which we had. She offered to split whatever money we made together. But far more important was that First American Title would invite us and our lenders to attend all their many seminars as well as other events they sponsored. This would all be offered for free. Moreover, every year at the New England Mortgage Bankers Convention, First American Title rents one of the great mansions in Newport, Rhode Island and has, what some have said is, a Great Gatsby party. You and all of your lenders are welcome. And she went on and on with more opportunities. It was amazing. Finally, at the end, she asked if there was anything else we would like. By now I felt quite comfortable so I told her that in addition to working with lenders we were expanding our business to work with lawyers. Since First American Title knew and worked with so many excellent real estate lawyers in Massachusetts, she offered to send a letter to everyone in their lawyer panel (hundreds), and she would inform them that we were working together. And indeed, we developed a line of business with lawyers. And so it was that we met and got to know First American. After seven years, my partner, Steve, and I had grown a small appraisal shop with five people to the largest regional appraisal company in New England, with seven offices and 75 employees. So why on earth would we have called all our clients to inform them that we had made a decision that would probably prevent them from giving us any more work and forcing us to close? The Story In 1982, I was laid off from my high school teaching job due to a reduction of the work force. I had enjoyed teaching and learned how to meaningfully engage the students as well as improve my organizing and presentation skills. While teaching during the day, I had earned a law degree at night, so I had lots of options. I was 35, married, and our daughter, Elizabeth was five. Catherine and I were still very much involved in the Magic Company. I developed four criteria for the job search – 1) time flexibility, 2) adequate money, 3) provide a useful service and 4) fit my interests and abilities. I explored a number of legal, banking, and insurance opportunities. None of them allowed for time flexibility and none piqued my interest. A friend of mine knew a realtor who had recently started a small real estate appraisal business and was looking for a few people. I did not really know what the job was about and I went for an interview. The realtor told me that I could do as many or as few appraisals as I wished (flexibility), and at least for now, earn $50 for each one, with no benefits, no guarantees, merely a possibility. His one-room office was a loft, located above a little fish store in Gloucester, MA. It is now a dental office - see photo. I decided to give it a try. He provided a little training and then I was on my own, learning something new on each appraisal. From the beginning, I loved the whole process - being out on my own, meeting the home-owners, going to town halls and local banks, figuring out the value and doing a simple report. In fact, especially in the nice weather, there was a certain feeling of “too good to be true” because I doubled my teacher’s salary within 1 ½ years. By 1985, the real estate market was sizzling and my friend Steve, another appraiser in the shop, wanted to take over and expand the company. He told me he would only do it if I did it with him. Just like that, we became partners in the venture. Over the next few years, I took the appraisal profession seriously, got designated by the Appraisal Institute, became a mentor to other appraisers in the area, had a column in the New England appraisal journals, and became a teacher and regular speaker for the lending community. Between 1985-1987, Steve and I opened up six additional offices throughout the New England states. We figured out how to connect the offices electronically (this was before computers really functioned well). We also designed a comprehensive training program and created a respectable company with employees, vacations, benefits and so on. We were very proud of what we had accomplished and looked forward to continuing our growth. What we did not take into account was the old adage, “what goes up, must come down.” We had only seen an increasing market throughout the 1980s and really had no practical idea of what happens when that stops and reverses. But, of course, that is the cycle. By 1989, the residential real estate market started grinding to a halt and house values began to decline. This was announced in almost every newspaper, and we saw it directly reflected on appraisals. Houses that were selling for $200,000 a year ago were now selling for $180,000 and there was no sense of leveling off. One of the important criteria that lenders use to determine how much they will lend is the value of the house. If the value is declining, the lender will take that into account and the loan will be smaller. In most cases, this will not provide enough money for the homeowner and the deal will fall apart. It is the appraiser’s job to determine if values are stable, increasing or decreasing. Our company, being the largest in New England, had begun to see declines in most areas. Our appraisers had not seen declining values in many years and needed instruction about what to do. As I mentioned, I was one of the appraisal instructors in the area and had taught appraisers how to support their determination of declining values. Within short order, it was crystal clear that we would be indicating declining values on most of our appraisals. Steve and I called our lenders, mostly credit unions and community banks. We told them what we were going to do and why. Although the lenders were sympathetic and understanding, they indicated we would probably not be getting much more work from them. They told us that the other appraisers they work with are not doing this. Steve and I were very clear-eyed that our decision would probably lead to the end of our company but we felt it was the right thing to do. Within one week, we lost ½ of our work. Which brings us full circle to my original question. On Friday afternoons, it was Steve’s and my custom to sit together in his office overlooking the Gloucester harbor, go over the prior week and look forward to what was coming. Somehow, in spite of our disappointment, we had both made internal peace with our decision. Steve kept some brandy for both happy and sad occasions and this was certainly a good time for a drink. We both agreed that the past seven years, especially the last five were a great ride for both of us and many people in our company. We had no regrets whatsoever even though neither of us had a “plan B”. I drove home and told Catherine the final details and she took it in stride. Catherine had a job. We had started our marriage with little money and we both knew we would work through the challenge together. On Monday morning I drove to work wondering how to proceed. To my complete surprise, shock really, our fax machine (a cool, new piece of technology at that time) had a list of 50 addresses. The letter was from a large New York bank with a simple note from the Senior Vice-President of REO (Real Estate Owned by the Bank) to call him which we did. He told us that they had thousands of foreclosures throughout New England that would need appraisals. He had heard about us because we refused to work for their retail / origination division known for their pressure for pushing unsupported values. All of those people had been fired. Within a few days and weeks, many of our other lenders called us. Our contacts who had cut us off from origination work were now in the REO division and wanted to use us. So it came to pass that for the next three years 70% of our work was REO and foreclosures. During this time, I became the appraisal representative in the Northeast for Freddie Mac and met monthly, either in New York or Washington with a group of industry leaders to strategize and help Freddie Mac with its gigantic foreclosure portfolio. Our perspective enlarged enormously. Sometimes a hard decision gets you to unexpected places. |
David FeldmanDog walker, Dog Mediator, Father, Husband, Categories |