Columbia University Libraries Digital Collections: The Real Estate Record

Real estate record and builders' guide: v. 22, no. 561: December 14, 1878

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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