Please note: this text may be incomplete. For more information about this OCR, view
About OCR text.
REAL ESTATE
AND
(Copyright, 1917. by The Record and Guide Co.)
NEW YORK, DECEMBER 22. 1917
DISCRIMINATIONS AGAINST REAL ESTATE
Realty Must Be Made a ''Quick Asset'* and Laws Amended to
Encourage Investors—General Use of Torrens Law Would Help
THE great obstacle to the market¬
ing of real estate is the fact that
it is a "slow asset." It cannot be
quickly converted into cash, and there¬
fore the investor must be prepared to
leave his money tied up for a con¬
siderable length of time because the
transfer of real property is a slow and
expensive affair.
This is due to the fact that the
ownership must be established beyond
a doubt on account of the existing laws
giving certain rights and interests in
real property to persons who, by virtue
of these rights, might attack the
validity of a transfer at any time, but
who really, by all the rules of com¬
mon sense and the laws of business,
should have no such rights whatever.
The title to property being thus un¬
certain no careful investor will buy
real estate today without a policj' of in¬
surance guaranteeing the title.
We must not overlook the fact that
any such claim recorded against real
estate practically makes that piece of
property unmarketable until such claim
has been decided by the courts. The
owner can neither sell, mortgage, nor
improve his property while the litiga¬
tion is pending, which may be many
years, and if finally the courts decide
in his favor the owner still loses.
because he has to bear the cost of
litigation, and becauuse the property
has not brought him adequate revenues
owing to the fact that he could not
with safety make a proper improve¬
ment. Also, for many occupancies,
tenants would not even lease for a
long term a property encumbered by
lis pendens.
The right of dower is one of the
claims which often affects a title. By
virtue of this right a woman who was
or claims to have been the lawful wife
of the grantor at the time of the
transfer may at any time bring an
action to set aside a sale and enforce
her right of dower. This right of dower
may be perfectly proper where the
real estate is a homestead, for it must
be admitted that the industry and sav¬
ings of the wife go into the homestead,
and her consent to the deed of transfer
is therefore necessary; but in the case
of properties which constitute the busi¬
ness of the husband which merely
yield him revenues and which are not
occupied by him as a home, such right
of dower is not justified and adds to
the difficulties of establishing a clear
title. Money invested in real estate
which is not occupied by the owner,
but which real estate is held by him
solely for letting purposes or for busi¬
ness purposes, should be the property
of the title holder only, and no person
should be permitted to claim any in¬
terest therein unless such interest is
clearly stated of record.
A shoe manufacturer can dispose of
his stock of goods or the machinery in
his building and nobody would ask him
to produce evidence of his ownership,
or require a policy insuring the title;
but the building within which these
goods are contained and produced can¬
not be sold by him without the consent
of his wife, and nobody would buy it
without a careful search and title'in¬
surance. Vet the factorv itself is as
By FREDERICK C. ZOBEL
much a part of the man*s business as
his machinery and stock of goods, and
just what right or interest the wife has
in such a piece of real estate is very
obscure.
It is not only the wife or alleged wife
who may attack the validity of the
property, but where a man dies intes¬
tate his children may present their
claims at some future time. Also a
deed given by a referee in a fore¬
closure proceeding does not guarantee
the title, and may be attacked by per¬
sons claiming an interest in the prop¬
erty on the ground that they were not
made parties to the foreclosure or were
not of legal age.
Too Many Difficulties.
The fact is that the titles* to real
estate are surrounded by too many
difficulties that should be wiped out by
proper legislation. These difficulties
do not only come up in the sale, but
also in the mortgaging of property.
Every mortgagee requires title insur¬
ance before he will lend money. All
this, of course, is good business for the
title insurance companies, who pros¬
pered so that their accumulated sur¬
plus enabled them to become lenders
on inortgages. The fees charged by
the title companies for searches and
insurance are fair. They are also fat.
Every time a title is transferred or a
mortgage renewed it means fees to the
title companies and expense and delay
to the owner.
I do not wish to be at all understood
as begrudging the prosperity of the
title companies, nor as being unappre-
ciative of the efficient and valuable
service rendered the real estate in¬
terests by insuring titles and thus mak¬
ing possible the buying and selling of
real estate. I am attacking the foolish
laws that make it necessary to have
title insurance, with its attendant ex¬
pense and delay. Why should title to
real estate be so difficult to ascertain
or establish?
The Situation Today.
Summed up the situation as it is
today is simply this: The title to no
piece of property can with certainty be
said to be correct, else why title in¬
surance?
The Torrens System of Title Regis¬
tration should be encouraged and its
working perfected so as to make the
searching of titles as simple and rapid
as possible. This would have the effect
of making deeds and mortgages liquid
assets convertible into cash without
delay.
Recently an acquaintance. "Mr. A."
of New York, passed through Seattle,
Washington, where he owned some
real estate. Washington has the Tor¬
rens System. He dropped in to see his
agent, and during the course of con
versation the agent offered him a piece
of land which Mr. A. thought was very
cheap. "But." said Mr. A., "I have no
money." The agent advised borrowing
$30,000 on the other property. -Mr. A.
said, "Impossible; it would detain me
too long, I have to leave tomorrow
morning." "It won't take long," said
the agent. "Just step around to the
bank with me." Mr. A. smiled in¬
credulously, but went to the bank. A
clerk was sent to the register, and in
half an hour returned with the searches
of both properties. The placing of
mortgage and purchase of new prop¬
erty, the drawing and recording of
papers was all done in less than
twenty-four hours, and at insignificant
expense. Think of the time and ex¬
pense such transactions involve.
Quite a good many years ago I went
to a bank and asked for a loan of
$2,000. I offered as security a second
mortgage on a piece of property, which
since the placing of this second mort¬
gage had been improved by a five-story
apartment house. There was a build¬
ing loan mortgage of about $30,000
behind my second mortgage of $2,000.
I was told that the bank could only
accept the mortgage after a little ex¬
amination and that I had better see
the bank's attorney and arrange that
detail with him. The fees for the
search and the discount would have
come to nearly 15 per cent., and I
would have had to wait until a proper
title examination had been made. I
declined with thanks.
Banks do not consider real estate
and mortgages good security. The
State Banking Department and Insur¬
ance Department do not consider real
estate a desirable asset or security for
a bank to hold, and for years have
urged banks and insurance companies
to get rid of their real estate holdings
and reduce the amounts of their mort¬
gages. Now just think of that! Let
the significance of this fact sink in:
The State that draws almost its entire
revenue from real estate tells the
banks that real estate is undesirable!
Are the State politicians tipping off
their banker and insurance friends
because they are planning to bleed real
estate white? Every force follows the
line of least resistance and real estate
has been attacked relentlessly because
the real estate interests are not
properly organized to defend their
rights. They are the weakest because
they are the smallest in number, and
numbers count on election day.
As a rule banks will not discount
the notes of real estate owners, the
latter not being rated by Dun's or
Bradstreet's, as they are not con¬
sidered business men. Business men
are only those who carry a stock of
goods. Yet these very banks, so chary
about loans on real estate, will dis¬
count the notes of a saloon-keeper no
matter how many empty bottles are
on his shelves. Dun's and Bradstreet's
give him a rating.
All this discrimination against real
estate in spite of the fact that every
statesman and economist will tell you
that the ownership of the soil is the
one thing that enables a man to live
up to the highest standards physically,
mentally and morally! The best citi¬
zen is the man who is anchored to
mother earth. He is steady; he does
not rove; he has demonstrated his
qualities of industry and thrift; he i.s
the most valuable asset of the country.
Evil days, indeed, are ahead in a coun.-
try where there is a majority of un-
landed rent payers, whose interests
are not fixed by any real estate in¬
vestments. Such people drift and shift
from one location to another as fancy
(Continued on page 806.)
RECOBD AKD GVIDE IS I\ ITS FIFTIETH VEAR OF COXTHVUOLS PVBWCATIQX,