Chapter XIX: Real Estate and Insurance

Lands, buildings, and houses are called real property or real estate, and the business pertaining to them, the real estate business. Every one of us has more or less to do with this business. If we do not own property, we pay _rent_. Rent is the money paid for the use of a piece of land, or a building, or part of a building, and is usually paid at certain stated intervals of time--monthly, for example. The owner of the building is called the _landlord_; the one who rents, the _tenant_. Sometimes there is no condition as to how long a tenant shall remain in one place and pay rent, but, as a rule, the landlord requires the tenant to sign a _lease_. This is a contract between the landlord and the tenant, stating that in consideration of the landlord's furnishing the tenant a place in which to live with certain conveniences--such as heat, hot water, and other services--the tenant agrees to pay rent for a certain length of time, usually a year or more. If the tenant moves out before his lease expires and refuses to pay the rent, he breaks the contract and, as is usually the case when a contract is broken, a lawsuit may follow. In large cities where land is in some places very valuable, owners may not care to sell the property on which others wish to build, but lease it to the builders for a certain term of years, usually ninety-nine years.

Suppose you no longer wish to pay rent, but to own the house in which you live. If you buy a piece of property from John Smith and pay him your money for it, you wish to be assured that after a few months John Smith will not come to you and claim the property as his. To protect you John Smith gives you a _deed_ to the property. A deed is a contract between the buyer and the seller of the property. It states that, in consideration of the buyer's paying a certain stipulated sum of money, the seller releases and conveys the property to the buyer. This deed shows that you now own the property. At the same time you should receive a _clear title_ to the property; that is, you wish to be sure that no one else has a claim on the property. If John Smith guarantees that the title is clear, he gives you a _warranty deed_ for the property, in which he will "warrant and defend the same against all lawful claims whatsoever." If, however, he simply turns over the property to you as it stands, he gives you a _quitclaim deed_, in which he relinquishes or quits all his interest in it. If you have no debts on the property, you own it in _fee simple_.

Very often in buying property, the purchaser pays only a part of the purchase price himself, paying for the balance by borrowing the necessary amount from a third party. For example, if the house you bought from John Smith cost $6,000 and you had only $4,000, you would be forced to borrow the other $2,000 to pay John Smith. You would then go to your bank or to some person who had money to invest and would borrow the required amount, and to guarantee that you would pay the money back, you would give a _mortgage_ on the property. A mortgage is a contract which states that, in consideration of one party's giving the second party a certain sum of money, the second party agrees to pay interest on that money at a stipulated rate, and at the end of a certain length of time agrees to pay the money back; and that, in case the second party does not pay back the amount at the end of the time, the first party is empowered to take possession of the property, to sell it, and to get the amount due him. This last procedure is called _foreclosing the mortgage_. It is a common practice to mortgage property; almost all the property in a city is mortgaged.

Some men and firms make a special business of transferring property, buying and selling it for others, making leases, and collecting rents. They are called real estate agents, and for their services get a _commission_, which is a certain percentage of the purchase or the selling price and a certain percentage of the amount of rent collected. This percentage varies according to whether the amount of money involved is large or small, the percentage being larger when small sums of money are involved than when large sums are involved.

=Exercise 295=

_Oral_

1. What is a lease?

2. Explain why owners of valuable property lease it.

3. What is a deed? Explain the two kinds.

4. What is meant by a clear title?

5. What is meant by fee simple?

6. Why is it important to be careful about the title?

7. What is a mortgage?

8. Explain why property is often mortgaged. Does the
mortgage benefit the owner? Explain.

9. What is meant by foreclosing?

10. What is an agent? How is he usually paid?

11. Why do people employ real estate agents to take
care of renting? To sell their property?

12. Why is property near a railroad valuable? For
what?

13. Why is a corner lot worth more than an inside lot?

14. Why is property on a car line more valuable than
on a side street?

15. What effect would the building of a new street car
line have on the value of adjacent property? Why?

=Exercise 296=

_Oral_

1. Suppose that you are a landlord and that in your
lease no mention is made of giving your tenants
janitor service, but you yourself take care of the
furnace. Other landlords in the block supply janitor
service. After one of your tenants has moved in, he
demands that the back porch be scrubbed once a week
and the garbage emptied daily. What would you do?
Consider the points for and against.

2. Suppose some boys playing ball on the street break
a plate glass window in the store you own. Would you
expect your tenant to pay for repairs?

_Written_

3. Write to Francis L. Russell, a real estate agent,
asking his terms for collecting the rent of ---- (tell
the location of the house, the number of the tenants,
and the rent you receive).

4. As if you were Francis L. Russell write a reply,
saying that you will undertake the collection for a
commission of 5%.

5. Imagine you are a tenant in the same building. The
kitchen sink cannot be used in your flat because of a
stoppage in the plumbing. You have told the agent
once. Write him (see 3) again, stating that unless he
sends a plumber you will not pay your next month's
rent. (Is there any reason for writing this, rather
than telephoning it?)

6. The plumber has submitted a bill of $5.98 for the
repairs suggested in (5). The agent writes to the
landlord, enclosing a check for the rent that he has
collected, less the amount of the plumber's bill and
his commission.

7. You are a lawyer. Write to the landlord, informing
him that the mortgage which your client holds against
the landlord's property expires in thirty days. Ask
the landlord whether he expects to pay the money or
whether he wishes a renewal of the loan for three
years. Your client is willing to give such a renewal.

8. The landlord replies that he is enclosing $100 to
pay the interest due on the mortgage and that he
desires a renewal of the loan. If the lawyer will
prepare the papers, he will come to sign them at the
specified time. Write the letter.

9. You are an insurance agent. Write to the landlord
that the fire insurance on his property expires in
sixty days. Ask him to allow you to write a new
policy. Inform him that the rate now will be 3-3/4%
instead of if 1-3/4% as it was formerly, because a
garage has been erected one door north of his
property. (Why should the rate be higher?)

10. One of the tenants has paid no rent for two
months. You decide that he never will be able to pay.
As landlord you make out and deliver to him a _Five
days' notice of removal_. At the same time, you write
a letter to your lawyer, explaining the state of
affairs and asking him to take charge of enforcing the
notice. (This means that if the tenant does not move,
the case must come up in court. If it is decided in
the landlord's favor, the tenant must move. If he
refuses, the lawyer engages a constable to eject him.)
Write the letter.

11. Francis L. Russell writes three short
advertisements, offering for sale (1) a large 12 room
residence, mortgage $6,000, price $15,000; (2) a 3
apartment building, clear, price $16,000; (3) a large
12 apartment building, mortgage $25,000, price
$41,000, terms to suit. Where would you advertise?
Write the advertisements.

12. You get inquiries about all of the above. Write
answers describing the buildings more fully, and make
appointments with the writers to inspect the property.

13. A man is interested in the 12 flat building, but
he has only $10,000. Offer him the property for
$40,000 on these terms: $10,000 down, a first mortgage
for $20,000 to run 10 years at 5%, and a second
mortgage for $10,000 to run 5 years at 5½%, $2,000 to
be paid each year with interest. Make it as attractive
as possible. Tell him you will arrange for the
mortgages.

14. (_a_) Write to your bank, the First National, and
explain that, although the first mortgage on the 12
flat building for $25,000 still has 3 years to run,
you would like to arrange for a 10 year mortgage for
$20,000, if your prospective buyer takes the property.
(_b_) Write to George R. Scott, who owns the building,
offering him the second mortgage. Explain that
although it is a second mortgage the fact that $2,000
of the principal is paid each year makes it
attractive. (How would the owner benefit if the buyer
failed to make his payments after 2 years?) Sign
yourself Francis L. Russell.

15. You have put through the deal. Write to the new
owner, offering to take care of the renting for a
commission equal to 2½% of the amount collected.

=Exercise 297--Farm Lands=

1. You own a large tract of land in the South, West, or Southwest. Choose your own locality. Prepare a pamphlet setting forth the advantages of this particular spot in a series of paragraphs: (1) scenery, (2) climate and healthfulness, (3) crops, (4) profits from the crops, (5) price of labor, (6) chances for pleasure, e.g., hunting, fishing, etc., (7) transportation facilities, (8) price of the land. Use a firm name and address.

2. Arrange and punctuate:

Nov. 1, 19-- [For the introduction supply the same
firm name used in (1)]. Gentlemen I have just returned
from an extended trip through (the district spoken of
above) with reference to the forty acres I purchased
from you I desire to say that I am convinced that it
will prove a paying investment I am so pleased that I
shall certainly try to induce several of my friends to
purchase near my site while on the property I
carefully inspected the farm worked by Mr S R Jackson
I must say what he is accomplishing the immense crop
of vegetables and fruit he is marketing amazed me no
doubt what he is doing I may do for I made sure by
careful examination that the soil on my land is
exactly like his you may depend upon it that within
the next two months I shall move my family upon the
land for I am eager to develop it sincerely yours F W
Farrell

What advantage would there be in including such a letter as (2) in the booklet spoken of in (1)?

3. To prove the possibilities of the land spoken of in (1), you intend to start a model farm. Advertise for a farmer. Your plan is to give him 60 acres to develop for himself, in return for which he shall demonstrate the possibilities of the land.

4. Write a letter applying for the position. You must have farming experience, some money, a knowledge of crops, and a good deal of enthusiasm.

5. Write an advertisement of your land for a big newspaper. Exploit its most striking features, especially the price. Study such advertisements before you write yours.

6. Reproduce a letter you received in answer to (5), asking for more information concerning the lands.

7. Write the reply to (6). Say you are enclosing the booklet spoken of in (1); tell of the model farm being established (3); and induce the inquirer to become a purchaser.

8. Prepare a series of three follow-up letters to be sent out to prospective purchasers who write as in (6) but who do not answer your letter in (7). Make each letter set forth one of the following advantages of buying a piece of your land: (1) The profits from the crops are large; (2) The conditions are ideal--mention climate, water, neighbors, transportation; (3) It is a good investment, since the land will certainly rise in value--tell of other land in the neighborhood that has risen in value within the last year. Arrange the letters in the order that you think will be most effective.

=Exercise 298=

Topics for Investigation and Discussion

1. The cause of changes in city real estate values.

2. The price of downtown property in your town.

3. The rise in property values in the last few years.

4. The causes of the rise.

5. Stove heated or steam heated property--which is the
better income producer?

6. The Mortgage.--(_a_) Why people mortgage their
property; (_b_) Why people loan money on mortgages.

7. The increase in the total value of farm lands
during the last ten years.

8. The decrease in the value of farm lands in the
East.

9. The reasons for the growth of the West.

10. Will the South be a new West?

11. The reclamation of swamp lands.

12. The success of irrigation.

=Exercise 299--Insurance=

An exposition of the subject of insurance is hardly in place here, especially as every one, to a certain extent at least, is acquainted with the fundamental reasons why insurance is purchased. The questions below should be used as a rudimentary review that will prepare for the letters that follow.

_Oral_

1. What is the object of insurance?

2. What is meant by a policy?

3. By the premium?

4. By the beneficiary?

5. By life insurance?

6. By fire insurance?

7. By accident insurance?

8. By marine insurance?

9. What is the difference between a straight life and
a 20 year endowment policy?

10. Between the above and a 20 year pay policy?

11. Between the above and a term policy?

12. Why is it that the mortgagee, and not the owner,
holds the fire insurance policy? Why must the amount
of insurance equal or exceed the amount of the
mortgage?

_Written_

1. You are an insurance agent. A man came to your
office to-day to inquire about a life insurance
policy. Write him a letter, repeating what you told
him, advocating his taking out a straight life policy.

2. A new building has just been erected in your
neighborhood. Write to the owner, soliciting him to
let you write the fire insurance policy.

3. Write to a man who rides downtown on the train
every day. Convince him that he needs to take out an
accident insurance policy. Point out that the premium
is only $25 a year. If the man is injured he will
receive $25 weekly; if he is killed by accident, his
beneficiary will receive $5,000; if he is killed on a
train or in an elevator, $10,000.

4. Write to one of your clients, informing him that
the premium on his life insurance policy falls due in
ten days.

5. Write to another of your clients, informing him
that the insurance on his property runs out in ten
days. Inform him that, if he wishes the policy
renewed, he should let you know at once and remit the
premium.

6. From the client mentioned in (5) you receive a
letter in which he explains that the paint store which
formerly adjoined his property has been replaced by a
grocery. He would like a new policy at a lower rate.
Reproduce the letter. A paint store is insured at the
highest, or hazard, rate. The rate on property
adjoining a paint store would also be very high.

7. You investigate the matter and find that the facts
are as stated in (6). Write your client, offering him
a rate of 1½% and enclosing a bill for $45.

8. He replies that, since the risk of fire is now so
much less, he wishes to take only $2,000 worth of
insurance. He asks you to write such a policy, and he
encloses his check for $30. Write the letter.

9. A man writes to you, saying that he wishes to take
out an endowment policy for his fifteen year old
daughter, who has already been examined. He wishes to
give the insurance to her as a birthday present. He
encloses a check for the premium and asks you to send
the contract to her on her birthday (Name the date).
Write the father's letter.

10. Write a letter to accompany the birthday present.
Remember you do not know the daughter.

=Exercise 300=

Write the following from dictation:

1

MUST REFORM OUR FARMING

The average yield of wheat in the United States for
the five years ending in 1910 was eight-tenths of a
bushel per acre more than in the five years ending in
1905, but it was less than four-tenths of a bushel
more than for the ten ending in 1900. The average corn
product for the ten years ending in 1910 was a little
less than for the ten years ending in 1875.
Thirty-five years had not advanced us a step. European
countries--Great Britain, France, Germany--with
inferior soils and less favorable climate produce
crops practically double our own. In our studies of
conservation we find no waste comparable, either in
magnitude or importance, to this. The farm will fail,
and the foundations of our prosperity be undermined,
unless agriculture is reformed. The percentage of our
people actively engaged in farming had fallen from
47.36 in 1870 to an estimated 32 in 1910. Every man on
the farm to-day must produce food for two mouths
against one forty years ago.

--_J. J. Hill._

2

THE FARMING SPECIALS

One of the latest and most successful activities of
the railroads is the practice of carrying knowledge of
the best farming methods to the farmers by means of
special trains equipped like agricultural colleges.
These trains, bearing experts and all the equipment
for exhibiting the new methods of agriculture, bring
the knowledge to the farmers free, and the railroads
are glad to give it, for every bit of knowledge comes
back to them in a hundred fold profit in freight. In
the summer eager audiences all over the country listen
to the preaching of better methods and larger crops.
Dozens of special trains travel through the
agricultural regions disseminating information. The
"Breakfast Bacon Special" has been run to encourage
Iowa farmers to raise more hogs to take advantage of
the high price of bacon. The Cotton Belt Route
southwest of St. Louis runs the "Squealer Special" to
prove to the Arkansas and Panhandle farmers the
money-making advantages of blooded hogs over the
razor-back variety. Down the Mississippi Valley the
Illinois Central sends the "Boll Weevil Special" to
conduct a campaign against that pest. The Harriman
lines have six trains operating in California every
year. In one year they visited more than seventy-five
thousand people. Better farming specials run in
practically every state south of the Ohio and Potomac
and west of the Mississippi. The New York Central also
has two trains in operation in New York.--_The
Business Almanac._

3

A large proportion of farmers give little or no
attention to the selection of seed; yet it has been
demonstrated that a careful selection would add
hundreds of millions of dollars to the total value of
the crops. If, for example, a variety of wheat were
developed capable of producing one more kernel to the
head, it would mean an addition, so Burbank says, of
15,000,000 bushels to our average wheat crop. It is
possible, however, to do even more than this. At the
Minnesota station a variety, selected for ten years
according to a definite principle, yielded twenty-five
per cent more than the parent variety. Applied to our
average crop, that increase would amount to
185,000,000 bushels, worth about $140,000,000. As for
corn, it has been officially stated that our average
yield could easily be doubled. After exhaustive
experiments the Department of Agriculture says that by
merely testing individual ears of seed corn and
rejecting those of low vitality an average yield of
nearly fourteen per cent could be secured, adding
about $200,000,000 to the value of the crop. Does
scientific seed selection seem worth while?--_The Wall
Street Journal._