Compensation and choice

I’m confused. No surprise there, right? It seems that the federal government is upset because some salespeople try to sell a customer a higher-profit item instead of a lower-profit one and believe that this situation requires federal intervention. Given the option, what salesperson wouldn’t want to sell a higher-profit product instead of a lower-profit one? If a buyer doesn’t want the product, he shouldn’t buy it. Simple, huh? Oh no…

I’ve only been back in the mortgage industry for a few months, but I’m already surprised by pending legislation. Apparently, you people out there are not capable of comparison-shopping on your own. It seems that the Feds believe that people who sell a product for more than they “have to” in order to generate a profit are somehow gouging the American public. Huh? If I offer my clients a higher interest rate than they believe they should have to pay, either they won’t close with me because they believe they can obtain an identical product for less money, or they will stay with me because they want to do business with me and believe that my services are worth more. While there is certainly a price point at which even clients who want to do business with me will walk and be irritated with me, those that close with me, I believe, are comfortable with my services and pricing. Those that are not so convinced, will not be sending me any referrals, and as a sales professional, my reputation is very important to me, so I’m going to do what I can to price my products competitively and earn my client’s business.

Okay, so you can’t get a mortgage for the same price those who employ loan officers pay, anymore than you can buy a car for what it costs the dealer. Why is that? Because the principle of commerce is to sell something for more than you paid for it. Maybe I’m missing something, and it would certainly not be the first time that has happened. So explain it to me. What’s wrong with making a profit? Gasoline companies do it. Investment bankers do it. Stock traders do it.

A lender offers a mortgage to banks, brokers and mortgage bankers at a certain interest rate, so they can make a profit from the difference between what they pay for the use of the money and what the loan officer can make lending it to a consumer. The mortgage banker, broker, or loan officer at a bank or credit union, then sells that mortgage for slightly more than what the lender is offering it to him for in order to generate a profit. Now, if that loan officer tries to sell a much higher rate, the customer will just go elsewhere for his mortgage. If a car salesman, homebuilder, or retailer try to sell their product for an “excessive” profit, whatever that might be, they will find that their customers will not buy their product, opting instead for a lower-priced product, all other factors being equal, which of course they almost never are.

Then again, why is it not illegal for gas stations to watch each other’s pricing and adjust their own to be competitive? If every gas station in town sells their gas for the same price, is that not restraint of trade? Collusion? Something? Maybe just sound business practice while giving consumers a different reason to come to their station, because the gasoline costs the same everywhere. Would it be illegal and requiring of federal intervention for a gas station attendant to try to convince drivers to buy a higher grade of gasoline for their car than necessary because it generates a higher profit? Higher octane fuel won’t hurt anyone’s car, though it probably won’t do anything for those designed to run on regular.

Is it a federal case for a car dealer to try to upsell a customer on undercoating, extended warranty, window tinting; the myriad of things that dealers do to generate additional income? If you don’t want the higher-priced option, don’t buy that car.

How far are you willing to travel for a lower price? What level of service are you willing to accept? How long are you willing to wait for your finished product to be delivered?

These are all factors that relate directly to the mortgage industry. If one LO offers a higher interest rate in order to generate a higher profit, he might just lose the deal. But you can’t view the transaction in a vacuum. What if he offers something extra in exchange for that higher interest rate, such as reduced closing costs? What about the ability to close the loan sooner than his lower-priced competition? Why is it anyone’s business but the buyer and seller how much is charged and paid for a product or service? As long as the consumer has choices and gets what he paid for, is this not what the American free-market economy is all about? If we are all offering the same interest rate, isn’t that restraint of trade, rather than each of us pricing his product at a slightly different rate? We all, in the mortgage industry, have to pay about the same thing for our processing, underwriting, overhead and salaries. We have to pay for offices and secretaries, processors and underwriters in order to offer our products to the public. Because you can’t go directly to the lender for your money, anymore than you can go directly to the manufacturer for your car or medications, you pay more than you “have to” for your mortgage.

As long as both parties are satisfied, it’s a good deal. There is already a federally-mandated, three-day “cooling off” period in the mortgage industry to cover buyer’s remorse, but most consumers these days have a pretty good idea what they should be paying for just about everything before they walk in the door. If I go to a used car dealer and buy a car in just the right color, with just the right equipment and mileage, but I could have bought a very similar, but not identical, car for much less, have I been ripped off? What if I bought a brand new car, at a dealership a mile from my home, but could have saved a lot if I’d driven out to the boonies for the exact same car? Did the dealer I bought from do something illegal by charging more than his outstate competitor; more than he had to? Did I not have the option to go elsewhere? The sticker price is right on the car. It’s the exact same price at every other dealer in the country, by federal law. Maybe one won’t sell the car without some add-ons that I don’t want to pay for. I don’t have to buy that car! It appears not to be illegal for the dealer to refuse to sell the car without his add-ons, since they install them as soon as the vehicle gets off the truck. I think I’m paying more than I “have to” for that car.

If I don’t want to put up with a facility that does not meet my personal standards, I may very well be willing to pay more for the exact same product at one that does. Macy’s relies on atmosphere and service to bring in customers and get their price. Can I buy the same thing for less elsewhere? Probably. Walmart used to specifically advertise the lowest price, but what if Walmart is 10 miles from my home and I can get the same thing for 10% more 2 miles away. Does that make it wrong for the closer seller to charge more for his products? Maybe he has a nicer store; a smaller one that won’t be as crowded and will take me less time to navigate. Maybe he just knows that he can get more money from people who don’t want to go all the way to Walmart. Does that make him a bad guy? What if, when I go into his store, knowing what I want, he convinces me to buy a higher-priced item because he makes more profit on it? Have I been ripped off if the product does the same thing as the cheaper one? I had a choice. I could have gone to the discount store. Finally, does this, too, require federal intervention?

If I, as a salesman, price my product too high, I simply won’t make that sale. The sales I do make will stay with me for a reason other than price (and probably not because they’re gullible). I believe that non-retail sales, and even some retail, are based on how the buyer feels about the salesperson as much as the actual deal. If the buyer likes the salesperson, feels like they’re working in their best interest and can help them achieve their goals in a timely manner, they might be willing to spend a little more than they absolutely have to to get what they want. I see that as the buyer’s decision, not the governments. If my clients don’t believe that my pricing is competitive, or that my services are not worth more than my competition, they will go elsewhere. Period.

As far as I know, I can not buy a new car directly from the manufacturer. I HAVE to go to a dealership and pay their various markups and fees to get that car. Why is it not illegal for GM not to sell directly to the public if I want to drive to the factory? Why is that not restraint of trade? Why can’t I get a new car and maybe waive the warranty for the discount of cutting out the dealer? What if the salesman convinces me to buy a more expensive car? The smaller, cheaper one would do the exact same thing in terms of getting me from point A to point B as the more expensive one. Did he do something wrong in convincing me to by a higher-profit model? Does this not now require federal intervention?

What salesman doesn’t want you to buy the higher-profit product or service from him versus the lower-profit one?

Why can’t I buy my medications directly from the manufacturer instead of having to pay a markup to a pharmacist? Why is it not restraint of trade or unfair pricing or whatever it is that the mortgage industry seems to be guilty of now, for anyone to sell something for more than they paid for it? If I buy the name-brand versus the cheaper generic, have I not now paid more than I have to for the same medication? Why is the federal government not cracking down on the name-brand manufacturers for charging more than their generic counterparts?

I try to operate more on a volume basis; making my living from closing more sales rather than making the most I can from each sale. I prefer to be in business for the long run, and believe that happy clients will send me referrals. I do the best job I can for each client and hope that they can see that.

If one LO offers a mortgage to a client for 1/8% more than the competition, but offers to close more quickly, or is closer to the client’s home, or offers to do whatever it takes to achieve a comfort level for the client, why is it any concern of the government that maybe that client could have shopped every other LO in town and gotten the same mortgage for 1/8% less, but it would take 30 days to close instead of 8, or paid higher closing costs, or had to drive 10 miles instead of 2? Maybe it’s worth it to the client to pay a slightly higher interest rate to get the deal done sooner. Maybe not. Maybe the LO was willing to work with them on a smaller loan amount, or is willing to work on a program that benefits the borrower when another LO was not.

Like I said, I just don’t understand what the government is trying to accomplish with this one. Given how much energy a strong real estate and mortgage industry can inject into an economy that desperately needs it right now, they should be focusing on how to keep mortgage interest rates as low as possible and keeping that interest tax-deductible, and let us do our job of educating the public and getting the economy moving, rather than insulting the American public by saying that they aren’t capable of making comparisons in the marketplace and deciding with whom they want to do business.

Tell me I’m wrong.

The Lease/Purchase Option

Back when I was a sub-prime mortgage broker, people with low-600 credit scores were golden. Even though I could do a lot with scores lower than that, once they hit the 600′s, life was much easier; 30-year fixed products were affordable.

Now, it seems not to be the case. Houses are sitting vacant for years at a time, sometimes the owners are supporting two mortgages. People with good jobs and a burning desire to own their own home are frustrated because something happened 1-2 years ago that put a sufficient blemish on their credit report to cause them to not even be eligible for FHA.

What to do?

Enter the Lease/Purchase Agreement. This is a “open-ended” lease agreement, whereby the buyer agrees to lease the home, usually for 12 months, and obligates themselves to purchase the home, and an agreed-upon price, at the end of the lease period. This is not a lease/purchase “option”, but rather a legal commitment on the parts of both parties to consummate the purchase and sale at (or before) the end of the initial lease.

If, at the end of the lease, the lessee/buyer is still not able to qualify for a mortgage, the lessor/seller has the option to extend the lease (which they usually do, not wanting the home to be vacant again) or evict the lessee.

In the meantime, the tenant treats the house as their home, completing all maintenance

Documentation

Why do you need to “document” everything, and what does that even mean?

Primarily, it means to have a written record as proof of something. for example, a contract. You engage another party to do something for you. You want to “document” the responsibilities of each party. What you expect them to do for you and what they expect you to do in return. Often, the contract is as simple as one party cutting the grass and the other cutting a check!

What about things that aren’t reduced to contractual language; that don’t necessarily need to be so formal? How can you prove a conversation? One option is to record the event in a contact management system like ACT!. I can record the gist of a conversation and hit “save” and my note will be time/date stamped. Is it as strong as contractual language? Of course not, but it does show what at least one party to the conversation believed the outcome to have been. The use of time/date stamping simply serves to reinforce the validity of the assertion. If one party can recall exactly when the conversation took place, it may bolster their side of the argument.

Next to a detailed contract, a note/email/text-message is the best documentation. As a rule, if I negotiate with, let’s say, a contractor to do work for me, and we already have an overall contract, I will follow-up any conversation with a confirming email. “Here is what I believe we decided to do. If your interpretation of the conversation is different, please let me know ASAP.” or words to that effect. The key is to have something in writing that you can refer to as the operational outline.

Recording the actual conversation works, too, and with many of today’s cell phones, it’s an easy function to access, but there are laws governing the recording of conversations. Be sure you know what they are, and if the recording is even admissible in court, if things get that far.

Another benefit to email is, at least with Outlook, you can receive a “receipt” from the system telling you, if nothing else, that the intended recipient has opened your message. That way, if the issue ever comes up, you can at least prove that the message was sent and received, even if you can’t prove that it was read and/or understood! At that point, it would be incumbent upon the recipient to let you know that there is a misunderstanding.

Of course text-messages must be saved in your phone or computer to be of value, and most systems have a way to get the message from the phone to another storage medium, so a backup file may be maintained for that correspondence, too. Otherwise, you may run the risk of accidental erasure, particularly on a cell phone.

Some banks and attorneys have told me that they don’t like to send confidential information via the internet, such as email, for fear that the confidentiality may be compromised, preferring to rely on a fax instead. Whereas an email goes out over the web and may be subject to interception, a fax goes from one machine to the other, via telephone lines. General broadcast versus point-to-point communication. Could a phone line be tapped and a fax intercepted? Sure. But there’s much less randomness to that method than broadcasting over the internet, especially if one party uses WiFi which broadcasts wirelessly, leaving the transmission open to interception.

Once you’ve committed your thoughts to writing, you need to save the document. What if you drop your laptop? What if your hard drive crashes? What if someone breaks into your office one night and steals all of your computers? First, of course, everything needs to be password protected. That way, even if someone steals the storage medium, they can’t erase or access your information. Next, all important information needs to be backed up and taken off-premises. Yes, you can use a fireproof safe on the premises, but if someone breaks in and steals the safe, too, you’re still in trouble.

The best backup methods, in my opinion are a combination of redundant copies (having the information on more than one hard drive), a portable storage device, such as an external hard drive, a flash drive; or even one of the off-premises storage services. So-called “cloud” storage.

Multiple copies protect you against a single hard drive crash. The off-premises storage protects you against things like fire or theft of the computers.

Back in the early 90′s when we first automated our insurance agency, we would do a daily, “end-of-day” backup tape, which was put into a fireproof safe the next morning. On Friday afternoon, my father would do an end-of-week backup, and take that tape home with him. And then we did an end-of-month backup, which went into a different fireproof safe. Personally, I don’t think that, in the event of a fire, the tapes would have been usable; recording tape being rather susceptible to heat, and the fireproof safe being probably 30 years old when we had it, but it was better than nothing.

Now the question becomes how long to retain the records. If you ask the IRS, they will give you one answer, and it will only pertain to your taxes. An attorney recently told me to just keep everything for ten years, and you should be safe. That seems to be the longest, reasonable expectation for record keeping.

The bottom line: Document your commitments, conversations, suggestions, via text, email or fax; retain the records with multiple copies, and get the backups away from the originals, preferably to a different location. It will seem like a lot of unnecessary work, until some requires you to provide the documentation!

Where has quality gone?

I can’t believe that nobody cares about the quality of their work anymore, but that’s certainly how it seems. I have a friend who produces commercials. His business is down because those who need the type of products that he produces are no longer willing to pay for “professional” quality. They are now more likely to be content with You Tube quality. If that sort of product is to make a point, okay, but if you choose lower quality for cost savings, the public can tell!

Is quality now only reserved for high-ticket items or services? Does no one take pride in their work simply for their work’s sake, or is adequate the new level of what is acceptable? If the guy that is painting my house misses spots, I expect him to spend as much time as necessary finishing the job, and I don’t believe he disagrees. Unlike the guy that did my roof repairs, he cares about the quality of his work, and actually hands out names and phone numbers of satisfied customers. Those are real testimonials! Now that he’s done, I will certainly become one of his referral sources.

We all know the old saying about a satisfied customer telling one of his friends about you but a dissatisfied one will tell everyone about you. Especially with the speed of information flow over the internet today, it is far too easy to impune a reputation via Facebook, or Linked-In, or to file an online complaint with the BBB or Attorney General’s office. You no longer even have to get to a mail box or fax machine. Just file your complaint online and it’s done.

People don’t seem to be afraid of damage to their reputation anymore. There was a time when service providers actually cared what the Better Business Bureau thought of them. Now? It seems like if they have sufficient volume, they don’t care what a few customers think of their work. Maybe they believe that no one will actually take the time to check up on them. Big mistake!

I know several people who spend a lot of time on the internet checking out people before they do business with them. These days, it’s just too easy for there to be any excuse not to. I guess those contractors figure that most will not want to waste time if their price is good, and by the time they find out, the contractor has the money and is gone. Another of the “sue me” attitudes that seem to pervade business these days.

How about individual responsibility? Do you go to work, punch the clock, so to speak, and then do just enough to get paid and maybe not get fired? Do you not feel any compunction to excel? As a self-employed professional, I realize that there are many out there that can offer a similar service (though of course, not as good as me), the economy being what it is, so it is incumbent on me to be just that much better.

I’ve never really been a 9-5′er anyway. I usually like what I’m doing and therefore devote as much time as necessary to do the best, most thorough job. Sometimes, more than I’m being paid for, but I believe that quality speaks for itself, and if you do more than you agreed to for one client, they’re only too happy to tell their friends.

I do understand the mentality of not doing more because there’s no reward, but I see that more the employer’s challenge than the workers. Sometimes the reward is solely in your head. You do the best job you can because that’s who you are and it’s the right thing to do.

It is certainly much easier to have pride in your work when you’re on your own, or in a position where higher quality will be recognized. It takes personal motivation; an internal desire to excel. Even if no one notices, you do, and it makes a difference to you.

Everyone remembers when an otherwise enjoyable, or even just a neutral, activity was spoiled by the indifferent attitude of a clerk, waiter, cashier. It wasn’t even the fact that they so obviously didn’t enjoy their work, but more that they were determined to share that lack of life satisfaction with you.

Whatever it is you do, do it to the best of your ability. Eventually, someone will notice, and if not, YOU notice. Hey; it’s what you do for at least a third of your life, so figure out a way to enjoy it, and if that’s not possible, for the benefit of those around you…pretend!

What is a warranty?

One of my favorite topics!

A warranty is a guarantee of the quality of the goods or services that one purchases. It says that the manufacturer or performer of the service believes enough in their products or services to offer to give you your money back, exchange the item for a new one, or correct poor-quality or defective workmanship.

It tells you that the vendor believes enough in his products, services and reputation that he’s willing to guarantee that what you get from him will do what it is supposed to do. That’s pretty much what we ask of the providers of goods and services; that their products and work will be what they say it will be.

Car manufacturers offer warranties on their products because manufacturing techniques and hence quality control used to be spotty. They had to guarantee that the products would do what they were supposed to do or they, the manufacturers, would correct the defect, free of charge. I remember that whenever my dad bought a new car, he’d always keep it for about two weeks, noting all of the things that were wrong with it, from the factory, and take it in once for service. It was expected.

People make buying decisions based on quality and warranty. If a company is not willing to guarantee the quality of their goods or services, that should be a major red flag. Heck, if they don’t trust what they do, why should you, right? There is also an “implied warranty”. That is, if you buy something, you should be able to safely assume that it will do what it is supposed to do, at minimum, or you can take it back to where you bought it and get a refund. In addition, as a rule, if you buy something or hire someone to do something for you and the product or their work causes some type of damage, you would be pretty safe in assuming that the manufacturer or service provider would be liable for those damages. “Products Liability”.

So let’s look an example. I have in my hand a “Workmanship Warranty” from a roofing contractor. First line, “(Let’s call him, “contractor”-the name’s not important at this time) warrants all labor for five (5) years from the date of contract.” All labor. Excellent! Makes you want to do business with these guys, right?

“2. If your roof, siding, or gutters has a installation defect (I am copying this directly), (contractor) will, at its cost, repair the defective workmanship.” Okay! Absolutely!

“3. If your roof, siding or gutters has a material defect, warranty reverts to the manufacturer’s warranty.” So if the materials that we bring to your job site are defective, take it up with the manufacturer. To me that’s kind of iffy, since I’ve engaged the contractor to do the work and they chose the materials. Are they saying that they won’t stand behind the materials that they brought to the job? Hopefully, they value their reputation enough to work with you and on your behalf to the manufacturer to get the issues resolved.

“4. It is at the discretion of (contractor) to determine if the failure is due to improper installation or material defects.” Seems like it would be pretty obvious, but okay. That way they can either fix it on the spot, or contact the manufacturer to rectify the situation. So far, so good, in assumption.

“5. Misuse, vandalism, acts of God, or improper maintenance will not be covered under this warranty.” Fair enough. If you don’t take care of your roof, whatever that means, or someone damages it, the installer isn’t responsible and neither will the manufacturer. Of course.

“6. (contractor) assumes no liability for incidental or consequential damages.” Okay, um, wait, what? First red flag! I’m not an attorney, who reads and interprets contracts for a living, but to me this says that if their workers drop a hammer on you or your neighbor while working on your roof, they take no responsibility. Or if they somehow start a fire while working on your roof and burn your building down, oops; not our fault. I don’t think so. See, I’m pretty sure that you can’t simply waive responsibility for damage that you cause by stating that it’s not your problem, but that’s what attorneys are for, to determine the validity of such things. Also, should such a claim arise and your homeowner’s insurance provider finds that you have agreed to such conditions, making them fully liable for the injuries or damage, that may not bode well for your continued relationship with them. I’m not sure they could cancel you for that, being an increased risk that wasn’t contemplated, but they may find a reason to non-renew.

Here’s the best part…”7. The five (5) year warranty provided only covers full roof, siding, or gutter replacements on property.” Here we go! So any and all of the foregoing offers to stand behind their work ONLY apply to a complete roof, siding or guttering replacement. Anything less than a full replacement is not covered by their warranty. So they won’t guarantee any repairs that they do, they take no responsibility if the materials are crap, and it’s not their problem if they injure someone or cause property damage, under any circumstances. What the…? Um, I don’t think so.

But then…”8. Repairs that are not full roof, siding, or gutter replacements are not covered by warranty. Any warranty on repair would be given at the discretion of (contractor) separate from this warranty, as it would normally not cover any repairs made to a previous contractors work.” So here we’re told, again, in case you missed it the first time, that unless they do a complete replacement, they won’t guarantee their work.

So, what have we learned? To read the warranty BEFORE signing the contract. Even if you know the guy, he comes highly recommended, he’s a relative; read the warranty. If he’s done a great job for other people and no one’s had a reason to read his warranty, yours could be the one place where his guys don’t to a good job, or cause injury or damage. If the contractor or manufacturer isn’t confident enough in their own products or services to guarantee it, unless it’s the only choice, find someone else.

Does anybody really believe this?

Okay, so I’m watching yet another of the enumerable online commercials for a get-rich-quick scheme. “Passive income!” “No technical knowledge required!” “Make money from home.” Maybe just the fact that there has been a proliferation of such offers over the past few years tells us that there are enough people buying into these programs that it’s worth whatever it costs to produce such commercials.

Maybe they even work! My guess is that they don’t “or everyone would be doing it”.

I don’t mind the teasers about selling products online being a more-or-less passive way to generate income. I certainly understand about setting up a web site and allowing people to buy from there. What bugs me is that each one says that all of the others gives you only a part of the story, but that they are going to share the complete secret with you. Maybe these vendors also have such sites and have decided to supplement their income by selling an instruction manual for you, too.

So after they explain that theirs is the only complete, foolproof system, they show you the latest (to me) form of testimonial, the bank statement. Or some sort of statement, with the account holder’s names grayed out, and the name of the bank mysteriously missing. Can anyone possibly believe that this is in any way a legitimate testimonial? A list of names with numbers next to them, purportedly reflecting the cash deposits into the bank accounts of participants in these schemes? I guess enough people must that vendors continue to post the commercials and send out broadcast emails enticing folks to watch the latest creation, “before we raise the price”.

Okay, I’ve ranted before about the testimonials from “David from San Francisco” or “Susan B. from Houston”. What a crock! But now, they’ve added the actual money that these people are making. How can anyone take that seriously? Well, I guess it’s the same people who are so desperate for an “answer” in today’s economy that they’re even willing to believe that imaginary people are making trumped-up incomes, doing something that seems, um, how do you say it, oh yeah, TOO GOOD TO BE TRUE.

Okay, in defense of these vendors, I have not purchased any of their programs, so I can’t speak from first-hand experience, and I’ll grant them that IF someone were to follow their suggestions to the letter, and devote the time and energy that running an actual business requires, and realize that they’re not going to get rich overnight, that the program might work for them, under the same principle that if you mail a catalog to enough people, someone will buy from you. If you have no fulfillment responsibility, that would be passive income.

I made one an offer: I would use their program, as an agent of their company, and split any income I made from them. In other words, if you believe so strongly in the program, and believe that anyone can make it work, use me as a real testimonial. Let’s partner up, give me the program, coach me through it. I’ll devote as much of my day as I need to to make it work, and because you’re so sure about your program, we’ll split the income.

So far, no takers.

Lawsuits as a business model.

There are, believe it or not, people who believe that every disagreement that comes up in business should or must be settled by a lawsuit.

I’m pretty sure that most of them have not stopped to consider the ramifications of such action, but rather it’s a spur-of-the-moment response. First and foremost is the cost, which I’ll discuss in a bit, but the next issue is, do you really want your disagreements to become public record? Just about everything that goes on in court becomes a matter of public record which future potential clients, customers or vendors can, and often do, take into account before deciding to do business with you. If a vendor, for instance, does some research and discovers that you have been sued, repeatedly, by former (or current) vendors, they may not want to take the chance to extend credit to you.

Likewise a new customer or client. If you display a predisposition to escalate every matter to a public, legal forum, it might scare away potential business, either because they don’t want you to sue them or because you display a cavalier attitude about being sued.

So let’s go back to the cost. Of course you have to hire your attorney. Even if he’s on a retainer with you, it’s not a salary. You’re going to be charged by the hour for whatever time he puts into the case. All your attorney has to sell is his time. Then he has to pay something to file the case. He may have to do legal research into your argument or produce documents to substantiate your case.

He may have to hire expert witnesses, including travel and lodging.

So let’s say that you do all of that assuming that any potential winnings will far offset the up-front investment. The case goes to trial and you have an outcome. 1. You lose, and you’ve wasted a lot of time and money. 2. You win a judgment. Now you have to go to the additional time and expense of collecting. Believe it or not, just because a court tells the other side that he has to pay you doesn’t mean it’s going to happen anytime soon, or without another fight.

3. The third scenario is that you win the judgment and the other party simply doesn’t have the resources to pay you. They are “judgment proof”. Maybe all of the assets are in a personal name and you won your verdict against the company, with whom you had the dispute. If the company has no assets, maybe a desk and file cabinet, what can you go after? Maybe you can obtain a garnishment against future earnings, maybe not. So you and they simply move on with your lives with this unsatisfied, unsatisfiable debt hanging between you. What have you accomplished?

There are times when you sue to prove a point, such as a restraining order or injunction. Maybe it’s a patent or copyright infringement and you need to stop the other party from doing something that will hurt your company. Again, you may not win any monetary compensation, but this may be an investment in your company’s future that you simply have to make. You may need to establish ownership or certain rights that are vital to your company’s existence. Sometimes you just have to bite the bullet and spend the money.

One alternative to a lawsuit is binding arbitration. This is a situation where the parties choose a referee to listen to both sides and make a decision, like a judge, on the merits of the case. The downside to this approach is that the arbitrator may not be an expert in your industry and may not understand how the situation affects your business.

The upside is that you and the other party get to choose your “judge”, there are few procedural rules as compared to rules of evidence in court, and it’s a whole lot less expensive.

The bottom line is that while knowing you can always sue is a business model, it is not a good one. Better to get conditions in writing beforehand so everyone knows what is expected of them. If a problem does arise, cooler heads should prevail and try to work it out. It is everyone’s best interest to avoid the court system if at all possible.

Testimonials

Among my many pet peeves in the world of business is the use of “testimonials” to reinforce an advertisers message.  I can only assume that there have been studies that show that the use of such referrals as “Dave P.:  I love this product” actually increases the likelihood that someone will buy, though I find it difficult to believe.

Or, “Ed from Rapid City, SD says, I was about  to die and then I took the little green pills.  Now, I’m a marathon runner”.  Oh come on; really?  “Ed from Rapid City”?  I can make up names, places and wonderful things to say about products, too.  Why would anyone even post such things?

Do you really believe that “David P.” or “Jim from Des Moines” is real?  Does that really reinforce a message?  Maybe because they drop that stuff at the end of the infomercial or print ad, they figure that there’s momentum.  That you’ve already read everything else about the product and are steadily moving forward, so you’ll see the testimonials and not even stop to question their validity.

A friend approached me recently and asked me to critique his web site.  I looked over the grammar, made some suggestions regarding what he was trying to say, and then got to the testimonials.  Again, first name, last initial.  Where is the validity in that?  What are you trying to say?

What I suggested, as an alternative, was to simply post scenarios of the situations of the people that he’d helped.  Rather than, “Sandra M. from Florissant says…”, say, “we had a female client (I use the gender to appeal to that gender) in Florissant who had gone through a divorce, etc, and and that caused this to happen, and here is what we were able to do for her.”

I can’t relate to people I’ve never heard of extolling the virtues of a product.  Are they saying that it’s okay to call them on the phone and ask them to verify their endorsement?  I’ve never cared enough to try, but one day I might just call the advertiser and ask for an actual phone number of the endorser.  I don’t want their email address, because you never really know who’s emailing, but a phone number I may be able to look up for verification.

If they won’t allow me to verify, what’s the point of even saying it?  There is absolutely no validity to something like that.  I could add the very same things to my web site.  “Jonathan L. from St. Charles says, Dan’s been like a Godsend to my business.  He’s helped every aspect of my company to perform better.”  Would anybody be impressed by that?  I don’t know; maybe.  Perhaps I should try it and see.   What if someone wants to speak to Jonathan L. and verify his claims?

“Well, due to the nature of what I do, all of my client names are confidential (I really do consider that to be the case), but I guess I could take your name and contact information and have Jonathan contact you.”  Then I’d have to find someone to be Jonathan, and call from non-displaying number, etc.  Seems like a lot of effort, and for what?

I think it’s better to put scenarios on the ad.  Here was the problem and here’s how we solved it.  Low income; raised prices and increased profits.  Needed to expand but no time; built a new location, stocked it and implemented a marketing campaign.

Hey, that sounds like a great idea.  I think I’ll try it myself!

What does your credit score really mean?

Having been in the mortgage business, I am acutely aware of what one’s credit report means to that person; to society in general.

In St. Louis, everyone, of course, asks you what high school you went to.  Why?  Because the way St. Louis is laid out, knowing what geographic area one comes from allows locals to make certain assumptions about that person, their upbringing, their socioeconomic status (at least when they were in school).  In that same vein, one’s credit report allows or causes others to make assumptions about you.

A low score tells the credit industry that you don’t pay your bills on time, or that you owe a lot of people a lot of money, or the opposite.  Credit reports do not reflect your income or financial value.  The reporting bureaus have no idea how much you earn or the size if your investment portfolio.

But think about the assumptions.  Like the person that may have gone to school in a less-affluent district, but went college and became an affluent professional, or started a business and became a wealthy entrepreneur.  All we know, at first, is where you came from, not where you are.  Likewise with a credit report, all we know is where you are, not where you came from.  We have no idea how you came to be in this position.

I once worked with a married couple, both attorneys, both very successful, both very busy.  For awhile, each thought the other was handling bill-paying, and neither was.  So, despite a low loan-to-value of their mortgage, and an almost $400,000 annual, combined income, they had low credit scores.  That tells me, legitimately, that they didn’t pay their bills on time.  Does it make them a bad credit risk?  I would argue that it does not.

I worked with another couple that had had excellent credit.  They had dual incomes, a mortgage, a couple of car payments, a couple of credit cards that they paid off, in full, every month.  Let’s say a 10-year, positive credit history.  Then he got laid off.  He was unemployed for about a year.  Then he got a job and is, once again, paying all of his bills on time.  An excellent credit risk, right?  Not today.

You see, when he had insufficient funds to pay his bills on time, but oddly, still had to live, he generated late payments.  Not one creditor ever lost a penny on him.  In fact, because he was late with payments, the creditors actually made MORE money from him in the form of late fees.

Let’s not even go to the extreme that he lost his home to foreclosure and must now live an “all cash” existence.  Sadly, that has become more and more common, but even not hitting that low, you can see where this is going.

I know you’re all shaking your heads.  The correct answer is, “no”, because his credit score took a beating during the time when he was unable to pay his bills on time.  So now, after an exemplary 10-year credit history, and due to circumstances that don’t show up on his credit report, his PRESENT circumstance is that of a poor risk due to THE YEAR that he had diminished income.  Did he stiff any creditors?  No.  Did he fail to make any payments?  Nope.  But because he made payments late, because he didn’t have the money, but now has the money and will, once again, pay on time, he will be made to suffer, financially.

Lord help him if he needs to borrow money for any reason now, and for the next three years, probably.

The opposite extreme is a problem as well.  What if you’re one of those throwbacks to an earlier day and pay everything in cash?  You can proudly proclaim that you don’t owe money to anyone and never have.  Maybe you even had some great deal on your home whereby you never had a reported mortgage.  You’re in great shape for credit now, right?  Nope.  All the credit bureaus know about you is that they know nothing about you.

I used to counsel my mortgage clients to obtain at least one credit card, charge nothing but gasoline on it, and pay the balance off in full, every month.  I would also tell them to pay rent with a check or money order.  Something verifiable, then come see me in a year with their established credit history.

So what does your credit report really say?  That today, and for the past couple of years, here’s who you have been.  Who are you now?  Who will you be tomorrow?  Unfortunately, that’s not something that can be seen, much less verified.

I am certainly not suggesting that you can go back in time and change anything that happened.  If you could have not lost your job, you would have done everything you could, I’m simply telling you what it says about you.  But don’t just take it lying down.  There may be things you can do to improve your credit score now.  There are many laws relating to credit reporting and a lot of them are not being followed.  Utilize that to your advantage.  I am aware of a requirement that collection agencies have to be able to prove the debt that they are collecting, and that sometimes, paperwork gets lost in the shuffle, so ask them to show you proof of the obligation or remove it from your report.  Look, I’m not telling anyone to do anything unethical, but you had excellent credit when you had a job, and now you have a job again.  Should you be punished?

Be aggressive; be assertive. Take control.  It’s your life!

Good manners

While I might not necessarily agree with the Facebook poster who stood at a gas station waiting for a “gentleman” to open the door; I think that’s game-playing, I do agree that chivalry had better not be dead.  Okay, unless it’s part of the interview process, just standing there waiting seems like a waste of time, but even if it is part of that process, that may not be the best way.

Manners should be a no-brainer.  Courtesy should be force-of-habit.  Just because you’re on the freakin’ cell phone doesn’t relieve you of the responsibility to drive safely, or signal, or not do things that endanger others.  Sure, I totally understand how absolutely essential it is for you to have that discussion at that particular time.   You’re busy; you’re important.  I get that.

If you are both that busy and that important, then you’re probably affluent enough to afford a good Bluetooth headset.  Use it.  No, it’s not going to help you REMEMBER to signal, but it will at least allow you to have both hands on the steering wheel just in case you decide to.

At meetings, I see lots of people park their iPhone or Blackberry on the table as they sit down.  Is that, too, a signal that you are busy and important?  Does it maybe tell the other person that either they are less important than whomever might call on your phone, or maybe that you haven’t decided yet?  Does it mean that you really have nowhere else to store your phone?  That you hold it in your hand whenever you’re on the move?

Or is it that you want people to know that you have the latest gadget, because that’s indicative of success?  I leave my phone on vibrate, in the holster.  I might glance down at it if it goes off, and I try to resist the urge, but I never answer it.  If you glance down, you’re just checking for an emergency call/text.  I understand that, but if you answer the call, the caller just became more important than the person you’re sitting with.  Really?

Sometimes they are.  Then what?  Do you take the call at the table or do you get up?  Since I don’t take non-emergency calls when I’m meeting with someone, I’m not sure.  If was an emergency, I’d probably sit there and talk.  I did have a client that kept calling me while I was in a meeting, once.  I finally excused myself and sent her a pre-stored text saying, “in a meeting…urgent?”  I apologized and resumed the meeting.

I tell my family and clients, if it’s urgent; text.  That way, I can see the urgent matter without having to take a phone call.  I realize that it’s a fine distinction, and maybe that’s not the right answer either.  Perhaps the right answer is to pretend that you’re meeting with a client that’s about to buy/sign/commit/whatever.  Would you bring a halt to the sales process to answer the phone?  I hope not.  If you’ve got the momentum going to close the sale and you stop, maybe you’ve just broken the mood by telling the client that his business is not so important to you after all.

Good manners definitely include holding the door; for men or women.  That woman you just held the door for, guys, might be your next client/customer/boss.  That older man who was having trouble with the door that you helped might own the company.  So might that nerdy 20-something that you helped by picking up stuff he was dropping.

Good manners might mean the consideration that whatever it is you’re doing, actually might not be as important as what the next guy is going, so maybe he really does need to be next in line, get the closer parking space (would it kill you to walk?), put his order in first.  Courtesy is NEVER the wrong thing to do.  Even if the other person doesn’t deserve it.  You just made yourself the better person by being courteous.

“Please”, “thank-you”, holding the door, sending a follow-up note/email/whatever; these things should all be common sense, and should not be the exception, but the norm.

Well, now you know how old I am.