Real  Estate   Record





AND BUILDERS' GUIDE.





Vol. xxn.





NEW YOKK, SATÜEDAY, DECEMBEE 14,1878.





No. oGl.





Published Weekly by

'€^t %ml €düt %imKs SssodatiüiT.

TERMS.
ONE YEAR. in advance.., .$10.00.
Communications should be addressed to

C.  W. SWEET,

Nos. 345 ASD 347 Broadway

SPECULATIVE BUILDERS.

Eveu amoug those who are passably well ac-
iiuainted with mattei-s of real estate, there is a
failure to comprehend the distinction between
legitimate aud speculative builders, uud a luck of
appreciation bordering on ignorance of the char¬
acteristics of tho speculative builder.

The tei-m speculator is so uuiversally regarded
as an opprobrious epithet that the preüx specula¬
tive has come to be i-egarded as denoting a char¬
acter altogether worthless and despicable. There
are senses in which every business under the sun
may be regai'ded as speculative, but such a gene-
ralization would be too broad to meet with com-
moQ acceptance. If all busiuess may be classified
as speculative the parado.xical statement may be
also justifiable, that all busiuess is also legitimate.
The distinction between these two terms must be
intelligently discriminated and defined, and must
be controlled by the well-known aud well recog¬
nized characteristics of different pursuits, and by
a knowledge of the pui-poses and motives govern-
lug those who embai-k in them. Tbere is a legiti¬
mate banking business and there is a speculative
banking business, and yet there are examples of
this business which may be said to combine both
elements.

Commouly speaking the term legitimate is ap¬
plied to those avocations in which mercantile
risks are reduced to an absolute minimum; the
term speculative, to those in which a greaterj^or
less degree of mercantile risk is Toluntarily as¬
sumed. As understood in the building trade, the
legitimate builder is oue who executes private
Orders on contract or on percentage ^upon lixed
aud stttted terms, the builder running no risk in
the transaction, except as to tho collectiou of his
contract price, when it becomes due. The specu¬
lative builder, so-called, owes his appellation not
to any inferiority or degradation of his calling,
because in its way it is quite as legitimate and
respectable as the other, but to the fact that he
accepts the entire risk of the financial result of
the transaction in which he embarks.

Some persons imagine that the term legitimate
is used to denote builders who possess capital in
sufficient amouut for their business requirements,
and that the term speculative is applied to those
builders who are destitute of capital. As a defi¬
nition, this failsto cover the facts or the merits
of the case. There are legitimate builders
who are not known to possess much, if any, capi¬
tal, and others who are well-known to possess
large means. There are also speculative builders
with and without capital, and those who seek to
•pursue this business fraudulently^ndjdishonestly,
are much more dangerous when they ppssess
capital thau when they do not.

Speculative   builders   are  the   fouttders  aaä





Creators of great cities, and to them, principally,
almost entirely, is due the credit of the rapid
and marvellou.s growth of American cities.
Whether their work be well or ill depends upon
the motives and circumstances governing them,
as much as upon their mechanical skill and mer¬
cantile responsibility. In the present artiele, we
propose to treat of speculative builders in their
two-fold capacities.

The DiSHoyEST Si-üculativk Buildkk.~Iii
taking up tbis sub ject it is as dillicult to know Just
where to begin, as it is to determine whether
the dishonest speculative builder is the victim of
circumstances which he is unable to control, or
Avhether he is tbe creator of circumstances which
inevitably tend to dishonorable issues. No fraud¬
ulent building job can bo undertaken and carried
to complete maturity without the co-operation of
other parties with the builder. There is the
greedy and overreaching lot owner, who deter¬
mines at any and all hazards, suffer who may, to
wrest from the transaction his pound of flesh, or
rather the extortionate price which he sets upon
his land. To attain his end, to wit, the realiza¬
tion of an inordinate and unwarrantable land
value, he w-ill i-un the gauntlet of many risks.
He will place his funds in jeopardy and assume a
Controlling interest in the undertaking until it
culminates in success or failure. To insure suc¬
cess he will resort to every device of legal ingen¬
uity, retain skilled and astute counsel, watch.long
and patiently thi'ough all the tedious stages of
the transaction. In the proverbial collapse of
the scheme, he is generally the least injured, if
hurt at all, because the earliest apprisedof dauger
and best able to take care of himself. The pro¬
fessional building loan capitalist is a fit associate
for the lowest type of speculative builder.

Brokers stimulated by couscieuceless rapacity
will conspire to inveigle lot ovvnei-s and build¬
ers, or oue as against the other, into these disgrace¬
ful and mischievous transactions, and then bound
the steps of both to prey upon them with illegiti¬
mate and unwarrantable commissious. Lawyers
too, of Standing and repute, and others without
Standing or reputation, are only too ready to lend
their ai 1, for the sake of fees, in furthering and fos¬
tering these trausactions. The loan which usually
accompanies the land is manipulated and^twisted
so as to become considerably shrunken in volume
before it passes iuto the hands of the builder,
while the builder is made responsible for the füll
amount which the capitalist furnishes. The in¬
terest charged against a fraudulent building job
is often enough to constitute a handsome profit on
the transaction, while commissions, bonuses, law
expenses, taxes and assessments go to swell the
burdens which slowly and surely stifle the life of
such enterprises. No wonder under these condi¬
tions the builder is driven to seek a curtailment
of outlay in the direction of mechanical construc¬
tion.

It is a sufficient commeutary upon what we have
denominated the fraudulent buüding loan job, in
which the lowest type of speculative builder usual¬
ly engages, to say that these builders rarely
emei^e with honor or success fi'om even a Single
one of these undertakings. There are others en¬
dowed with sufficient strength o£ character, or of
purse, aod sufficiently endowed witb intellectual





resources to euable them to link a succession of
these schemes together. The large majority of
these builders sink exliau.-*ted at er betöre the
eompletion of the ürst or second undertaking.

There is no need ofa fresh Inflation of the cur¬
rency to stimulate enterprises of this character,
because in each and every case the elements of
the wildest inflation are präsent, eveu though they
were projected in times of specie payments. Nor
is it ueces.sary for the collapse of these scheine.«»
that any startling üiiaucial panic should ensue,
becauso they are pervaded with the aetive prin¬
ciples of financial ruiu.

At intervals, more or less' marked aud regulär,
there will be seen in the upper part of the city,
buildings carried to dilferent stages of advance-
meut short of eompletion, which havo the appear¬
ance of being totally deserted and dismantled,
wbere, perhaps, asolitary watchman keeps guard
over the desolate and dreary premises. Inquiry
will generally develop the fact that these struc¬
tures are the forlorn and miserable products of
some fraudulent building scheme, the principals
of which have transferred the administration of
theii- contracts to the Courts. With some capi¬
talists it is rather commendatory than otherwise
that the applicaut should have the ap{>earance of
being a hard-working, honest, plodding mechanic
—traits of character which scheming and design¬
ing building loan Operators have little difflcultv
in simulating. Whatever allowance or consider¬
ation well meaning land owners may be disposed
to extend when treating with an applying builder
—qualifications as to character, honesty and past
business career should never be overlooked. With
scheming lot owners who are not a whit better than
the dishonest speculative builder, such advice may
be superfluous, because the more daring, reckless
and irresponsible the builder may be, the better
he will suit the purpose of the unscrupulous lot
owner.

The possession of capital alone without .satis¬
factory busiuess character is far from affording
any adequate guarantee to the lot owner who pro¬
poses to couple th^ loan of money -tvith the sale of
his land. Some of the most disreputable, exten¬
sive and disastrous schemes in building loans have
been engineered and controlled by builders who
possessed in their own right or had the command
of ample capital. When tbe element of capital is
added to the qualifications of a reckless building
loan Operator, his ability to cope successfuUy with
tbe capitalist in those conüicts which are certain
to arise is immeasurably enhaneed.

As a rule, the greatest suft'erei-s by fraudulent
and dishonest building schemes are the creditors
—the material men, mechanics and laborers
employed by the builder to carry on his works.
The weaker of these are invai-iable iinpoverished
and reduced to bitter straits. The public at large,
house-buyers aud house-renters, are victimized iu
their turn when they come to occupy these un
soimd building productions for they are apt to
prove in praetical use anything but comfortable
homesteads.

As reprehensible and discreditable as these
schemes are to a great metropolis, it would seem
as though there was no way of checking or eradi¬
eating them, except through the co-operate and
combined awition of lot owners, mechanics and