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Real estate record and builders' guide: [v. 100, no. 2597: Articles]: December 22, 1917

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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,