Columbia University Libraries Digital Collections: The Real Estate Record

Real estate record and builders' guide: v. 22, no. 542: August 3, 1878

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Real Estate Record AND BUILDERS' GUIDE. Vol. XXII. NEW YOEK, SATÜEDAY, AUGUST 3, 1878. No. 542. Published Weekly by TERMS. OIVE YKAR, in advance.. ..SlO.OO. Ooiiiiniinications should beaddre.ssed to C. \V. .SIVKKT, Nos. ."Wo ANO ''A7 KnOADW.W lllSlsIS OF BUILDING LOANS. Building loans m.ay bo framed .«;o .13 to bo free from risk or relativoly so. No mercantile traus- actiou.s uro entirely free from risk, but a well-cou- sidered, judieionsly-planned and hone.stly-coii- eeived scheine of building loan should involve as little serious risk as is perniissible in business all'aii'.s. A\'iieii a discre(!t and fair-minded cajiitalist has tlie good fortune to meet with an honest and coni- petent builder, pos.sessod of a moderate sh.nre of eaoital, tlic business rekitions of such partie-s are likely tobe of the mo.st satisfactory kind. Whether tlie emolument of the capitalist is great or small, in such ciises he derives his share of the pccuniary beneiit of the traiis.acfcion in such asiinple, natunvl and e^Lsy w.aj', that he is inelined to felicitato him¬ self upon his happj' lot. A business, however, in which there is but one oa.se of ultimate success to ninety-nine of failure, must contain bene.itb its surface elements of risk which it were well if possible to explore and deline. The ri.sks of building lo.ins, as far as they relatc to tlic capitalist, tuke root in the character or tbe .solvency of the builder; ijersonal qnalities which it behooves tho capitalist to examine and test. Tho nlluriug feature of the transaction is that it aiJpeiii's to guarantee to tbe capitalist a probt in advance of the result of the venture. In other words, the capitalist is allowed to realize his proßt 011 ptiper loug in advance of the possibüity of bis realizing it in money, and the intermediatc steps between tbe two stages are apt to be so masked and concealed as to entirely escape the scrutiny and consideration of the capitalist when he em- bai'ks. The sale of lots nt a stipulated price, with covenants as to the loaning of money, all properly arranged and defmed in a written contract, seems iis piain and clear as a bill of sale or articles of a Charter party. In in'actical workiug these trans¬ actions M-e not nearly so simple or smooth as they at first seem. If the builder is an unscrupulous, cuniüng, low fellow- he will probably try to lead on the capit¬ alist until the first payments on the contract are secured. and until the capitalist has become so far counnitted to the work that retreat or even hesi- tatiou becomes impossible. "When this point has been reached, the builder comraences a system- atic coui-se of bulldozing and iutimidation, threat- euing to stop the work or to delay it, or, perhaps, pleading poverty and inability to proceed accord¬ ing to the conditions defined in the contract, and begging for a new deal. No description of the ordcal through which the capitalist is compelied to pass in the exigeucies of an insolvent or fraud- • ulent building scheine would adequatoly repro- duce the reality. Tho detnils of this experience must be learnod from tiioso who havo already gone through it. Two risks or alternatives are here preseuted to the capitalist. He maj-, in the lirst iilace, take his stand firmlj' aud refuse to waive or exceed the terms of the contract Thon, in caso of the failure or refusal of the builder to proceed, be may assort his reserved rights by foreclosing und acquirhig the property. If the capitalist is un¬ willing to proceed to tho.'^e extreme measures, or is di-ssuaded from it by counsel or friend.s, bis purso-strings are apt to be unloosed or bis bank account tlirown open to the free incursioiis of the builder. The domands for money become l>orsi.stent and importiimite, and the threats of evil conseitueiicos more intiniiduling. Tho ~".anting of lojins to the extent of fift3- per cent. in exce.'s of the covenanted amount would be a favor.able i.ssuo, bec.iuse in many c.asos the excess reaches lO'i or l.öO per cent. If the builder has originally ngreeil to take a loan equal to one- half the co.st of building, he may manage to ex- tract from the capitalist double that amount, or tbe whole cost of the building, aud sometimes au amount in excess of the cost. If tho market is buoj-ant, and prices are ad¬ vancing, these liberal lo.ins may be reimburscd; but, as too often happeiis, the capitalist finds him¬ self at the end of the job with 'premises pledged as security for his advances, whose negotiable market value represeuts only a fraction of the sum lonned. Of these two methods of dealing with tlefaulted building loan contracts, the fonner is the safer and therefore preferable one. However formidablo its consequences may seem, a strict and severe interpretatiou of tho ponalties of tho contract is the only safe, regulär and practicable method for tho capitalist to adopt. Leniency iu these cases merely affords tho builder a license, wliich he is j apt to abuso to the great loss and detriment of the ! capitalist. When tho latter linds he has made a bad j bargain, he must reinstate himself without delay in n Position of absolute control. There are cases where the bargain has been made, contract cn- } tered into, work begun, and, after the receipt of one or more payments, the builder deliberatoly I abandons tho job and perhaps absconds. This presents a risk different from the other and equnl- ly embarrasing. The capitalist, a" professional man or merchant, perhaps, is totally unacquaiuted with the details of building, and is forced to got possessio!! of the property as promptly as possi¬ ble, and then set to work to complete the improve- j ments already begun. To do this speedily nnd I easily, he is apt to find himself at the niei'cy of the original contractoi's, who are creditors of the builder, and disposed to seek such liberal mai'gins of profit frora the new owner as will cover the losses which the3' have already sustained on the Job. If the capitalist is obliged to seek new con¬ tractors, through whom he may effect the eom¬ pletion of tho work, he finds himself involved in an annoying and hai'assing business, and one that wiU make extraordinai-y demands upon his time, patienceandpurse. Inaword, however uncon- genial or unexpected the employmcnt may bo, he finds he must become, in spite|of bis prejutlice.s a builder and owner of propcit}' rather than a more capitalist and handler of money. Instead of realizing bis cnpital by the prompt negotiabii- ity of the pi-emises, the capitiUst is often obliged to make a permanent investment of.tho i>roperty with which he has thus become entangled. The legal delaj's and expenses involved in re- coveriug possessio!! of the title is a risk whieh must also be allowed for in the outset of these undei'takings. Unsucros.sftil and disastrous building loans are gcneruUj- founded in gross lictioiis. and represent efforts to work palpable miracles, to perforiu im- po.ssibilitics. The capitali.st is either deluded by others or deludes himself into tbe belief that the building business is capable of producing mar- vellous and prodigous resuits, whereas under the most Lavorable circumstances legitimate building is productive of only modei'ate profit. Building loan schemes ure outerod into recklesslj' and often with a dishonest purpose. A fabulous and ex- haustivo bonus is ostensibly guaranteed iu ad¬ vance to the capitalist, and the builder liopes through monied assi.stance to twLst and wrigglo his way through the job, intendhig in anj- ovent to take good care of himself. The disaster wbich overtakes the transaction earlier or later in its progress may seem like a surprise to the bewil- dered capitalist, w-hile in reality it may be a re¬ sult deliberately anticipated by the builder, and certainly foreseen by auy intelligent pei-son con- versiint with the details of the undertaking, the critical and undetcrmiued point being merely as to when the final catastrophe would happen. It is the avowed experience of capitalists who have exploited these schemes, that there is no profit ordinarily attainable in them that will offset tho i-isk, hardship and inconvenience that iusep- arably attend defaulted building loan traiLsac- tious. It is indispensable to commercial comfort and success in these transactions that tho capi- tjüist should bestride an easy-going hoi-se not vicious or fi'actious or liable to break down. MAE.KET REVIE-W. REAL ESTATE MARKET. During the month of July 481 deeds, excluding those affecting property in the Twenty-third and Twenty- fourth Wards, were flled for record in the oflice of the Register of the City of New York, being ninety-nine less than the number filed during the month of June. The aggreirate consideration expressed in such deeds amounts to §^1,890,9-12, against S5,äl4,769 the amount expressed in the whole number of deeds filed during the month of July, 1877. The number of mortgages filed for record durina: last month is 477, representing the sum of §^1.424,585, against §3.476,687 for the month of Juue; '2'2U mortgages bear interest atGper cent., aggregating the sum of §1,685,070. The total number made in favor of trust and Insurance companies is fifty, representing §65:1,500. At the Exchange Salesroom the entire interest was again centered in foreclosure sales, füll details of which are given below. In the Building Department no plans worthy of special notice have been flled since our last report. The total number of plans filed is ten, embracing twenty-two buildings, the estimated cost of which ia §120,200.