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Real estate record and builders' guide: v. 22, no. 539: July 13, 1878

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Real Estate Record AND BUILDERS' GUIDE. YoL. XXII. NEW YOEK, SATÜRDAY, JÜLY 13, 1878. No. 539. PublishedtWeekly by Wbt %ml ÖEslale Set orb l^ssonaiioii. TERMS. ONE YEAR, in advance....810.00. Communications should be addressed to C. "AV. S^IVEET, Nos. 3-15 AND 347 Broadway. REAL ESTATE REFORM. There are alwaj-s persons in a comnmnitj' so wedded to tbe established order of things, whose iuterests are so bound up in that oruer, that anj- changeor disturbance islooked upon as a personal grievance to be appropriatelj- deplored and be- moaned. There are o hers who are inelined to look upon the established order as either immuta¬ ble or susceptible of jjo amelioration. Their common remark is that things are well enough as thej' are, or. if not -well enough, it were idle to attempt to reform them ; and their natural dis¬ position is to bear the evils that they have, rather than flj' to others that thej- knou- not of. The niagnitude of the changes which have taken place in tbe real estate market dui^ing the past five J'ears would be startling and appalling -were we not hnbituallj' inured to abrupt aud sudden convulsions iu this countrj'. A course of evil practices here nmj' be long tolerated and patieutlj' borne, but when tbe change conies it is apt to be swift and radical. The most fatal Symptoms of the real estate distemper, which raged so furiouslj' five or ton j'ears ago, were an abiding faitb that the order hings which then existed was unchangeable; that the practices which then prevaiied were iron-clad nnd invul¬ nerable ; at any rate, not likely to meet with any serions disturbance. It must be patent to tho least interested ob- server, however. that a coraplete metamorphosis has passed over tbe world of real estate affairs. Important changes audreforms have been silentlj- but surelj' worked out. The desire for these reforms raust have been deep-seated and wide- spread long betöre their füll accomplishment was determiued. TVhile desiring to claim a share in the labor of promoting some beneficent changes, we haveno idea of appropriating to ourselves the entire credit. Our joiu-nal has merelj' sei-^'ed as a moutbpioce for exprcssing wishes and cravings which were latent and smouldering in the public niind. AiA''e will brieflj' note what seem to us to be the salient features of these reforms. 1. V..\x.üES.—^We are accustomed to speak of the changes in real estate values us effects of öhrinkage, depreciation, depression, economj-, etc. In point of fact, befoi-e the panic, real estate values in this city had reached a dangerous and unparalleled altitude of artificial Inflation; The gro%vth of the city, tha possibüity of its becomiog the seat of prosperous business and of populous residence alike demancled the readjust- ment of these values, We are aware that this change involved all the agoliies of a surgical Ope¬ ration. We are not insensible to the excruciating hardship of the losses attendingreäl ^tate in-yest- ments made during the past ten years. Neither can we lament tbe change that has come over these values. The former plane was one where trausactions nece.ssarilj- became limited and haz- ardous. The present plane is one which invites trausactions, where thej- are absolved from anj' great element of risk, and if furnishing no ground work of a new speculative movement, it at least presents the promise of extensive legitimate deal- ings, beneficial alike to the citv- and the masses of Population. The reform in land values and rental vnluations is the most signiflcant and pregnnnt of any that has been eft'ected during the past three j-ears. 2. Building—AA^o have good reason to believe that capitnlists and builders are becoming more discriminating and intelligent with regard to tho elfect of building lo.ans- The fraudulent building loan is rapidlj' becoming a tbing of the past. There is a inarked indisposition on the part of even the most veuturesonie capitalists to risk their funds in these trausactions: and build¬ ers, who have heretofore found illegitiraate prolit in floati g these -schemes, stand in danger of losiiig their occupation. Even the legitimate building loan is being gauged to the Standard of common sense and sound dealing. There is a promising prospect that the future building improvements of this citj' will be con- ducted in such a wnj' that the mechanics con¬ eerned iu them will not be defrauded of their just dues, and that a bligbting disgrace will be removed from an honorable and ineritorious call- ing. Fraudulent building loans are at length at- tracting the attention of the grand juries—the parties to them being considercd fit subjects for criminal indictments. 3. MOUTGAGE LOAN-S.—The disreputable prac¬ tica which once prevaiied in fiduciary institu- tions and among private trustees of advancing unwarrautable sums on real estate securitj-, in consideration of a bonus or money iuducement temptingly offered, has passed away. Among individuals and institutions a disposition is con- spicuously evineed to guard the integrity of the mortgage loan, as a sound, safe and wise Invest¬ ment, aud to keep it entirely free from all en- tangleiuent in speculative ventures. The pro- niotion of land speeulation bj- means of excessive mortgages, or, in realitj-. tbe gunibling in real estate mortgages with other people's monej-, is a feat hardly possible of achievement at the present time. 4. Interest Rate.—The reduction of the in terest rate on mortgage loans. by common con¬ sent, to 0 per cent., indicates one of the most im¬ portant reforms of the times. This change is due, not alone to the plethora of monej-, for long nfter monej' faüed to conmiand high rates in open market, the rate on mortgages was maiu- tained at 7 per cenr. To properl->- measure the extent of this change, -we must lemember that thö i'eduction is equal to a saving of neärlj' 15 jleir cent. of annual oiitgo tö the borrower, and a Ib^^ bf a like share of income to the lendei'. This difference, aa small or as great as it may seem, repreSeÄts the reformed practice of mortgage lenders. The high rate of interest on mortgage loans was maintained for some time after the psuiic, because exceraive loans continued to be asked fbr, and lenders were temp «^d to grant the.«e loans for thesuke of realizing the maxiraum rate of interest. AVhen, however, thej' cume to uuderstand tbe risk which they were running, the likelihood of their having to become owners of propertj- bj' foreclosure, they quicklj' ehanged their ttictics. In order to evoke mortgages of the highest grade of securitj-, it became neces- sary to accept 0 per cent., or, as interest. The six per cent. Standard is tbe most conserv- ative tcst that can be applied to real estate valua- !;ions. It has been the ready means of rais- ing populär estiniation of mortgage Invest¬ ments to the highest level, just when confl- dence was being sadlj' ^hattered iu their desii^ableness and the dailj- press was advo- cating their exclusion frora corporate assets, A slight i-elief in taxation would reduce the interest rate to a .still lower level. AA'e believe the observance of this exceptionally severe Stand¬ ard in gauging mortgage loans will be continued for the future, and that the practice will exert a beneficiallj' tjuieting effect upon values—and a wholesome oheck upon the vagaries of Investors. f). Cou.vsEL, Fees.—The most flagrant abuses that ever characterised anj' brauch of busi¬ ness were the extortionate and unconscionable exactions formerlj' made under the guise of legal fees in conveynncing. The radical reform which has been wrought in this respect is a grateful and acceptable one to the whole real estate Commu¬ nity. The presentation of this subject was promptlj' responded to by two of our leading fiduciarj- institutions, whose managers are eutitled to the highest praise, as well as the pro- foiuid respect of real estate dealers for initiating a wise and salutarj-policj-in the negotiation of mortgage loans. There can be no retrograde movement in this matter of counsel fees. The Steps taken by the two institutions referred to were no doubt carefuUj' cousidered and deliber- atelj' planned, Their tidoptiou has involved a -vital change of organiza ion, the establishment of a System which may not be quicklj- dispensed with. The likelihood is that all other reputable and conservative institutions engaged in the loan- ing of money on mortgage—life Insurance com- panies and savings banlts—will be compelied in time to adopt this method of emploj'ing salaried counsel to examine titles for loans, and to waive all cbarges in counection with mortgage loans except the cost of ofllcial seurches. In fact, a leg¬ islative enactment compelling all such institutions to adopt this metbotl would be ti grc:it relief to the borrowing public and constitute no hardship to tbe Cümi)anies. Ün the coutrarj-, it would establish a valuable safeguard in preventing anj- utilawful collusion brokcrs. borrowers and representutives of thö lending institution.«. This corporate example has worked n good eft'ect upon private counsel. In everj' res[)ectable oflice iu this citj" the cbarges for examiniug titles for loans have been gi'eatly reduced, and in some cases private lenders are considering the expedi- ency of bearing legal expenses themselves in Order to securo the most desirable loans- 6. AüCTiON S.Ü-ES.—A conspicuous reform has been lately effected in the matter of auction sales. "We need not levert to the once prnctised in tbe auction room. Thej- are alreadj- matters Df sufilcient public notorietj-, Their pei-petration well nigh. destroyed the ancient and honorablt»