Sec. 45. Where land is sold at so much per front foot, frontage, even though a lot be irregular in shape or shallow in depth, becomes the measure of increase in gain. The rate per front foot should always be taken into account, as that is the basis of comparing the relative value of two or more parcels, although one parcel, because of advantageous location or otherwise, may be more desirable than another. Extensive frontage is always desirable, particularly if it be partially improved and extends from a corner, and this is especially true if the improvements are on that portion most distant from the corner. The return in the way of rental from the improvements may be low as against the value of the entire parcel; but if the parcel be divided, and sufficient frontage retained for the improvements, the improved portion will show a higher and creditable rate in the way of rent, and can be more readily sold; and the corner, having an ample frontage on two sides for an ordinary business building, can safely be held until it can subsequently be sold at a considerable increase.
Sec. 46. Another means of gain open to the real estate operator is the placing of sub-divisions on the market. This, in effect, consists in buying land at wholesale and selling it at retail. (See also Chapter on Sub-divisions.)
Sec. 47. If the object for which the property is intended is a home, to be occupied by the purchaser and his family, it is manifest that there will be many more things to be taken into consideration than if the property be purchased as an investment merely.
When property is purchased for a home, it is important to consider:
(1.) The general character of the neighborhood.
(2.) The reputation of the immediate neighbors.
(3.) The healthfulness of the locality.
(4.) The proximity to school and to the church edifice which the family will attend.
(5.) The distance from the home to the business office of the head of the family.
(6.) The situation of the house with respect to receiving the sun in front in the morning or in the afternoon.
(7.) The convenience of the interior arrangement of the house.
(8.) The cheerful or gloomy aspect of the structure, and numerous other points favorable and unfavorable.
Sec. 48. In getting at the facts, the prospective buyer, upon making his first inquiry in regard to a property, should let the owner or agent do most of the talking. The buyer should pay strict attention to what is told him and make a mental note of it as well as of everything shown him in connection with the property. The buyer should view the property by approaching it from several different directions. If the prospective buyer is desirous of asking questions, he will usually get better results by deferring his interrogatories until his second visit. He should then take the initiative and prosecute his probing with rapid, decisive and leading questions, not forgetting to introduce some inquiries which must, in the very nature of things, be unexpected on the part of the seller.
Sec. 49. The intending buyer should not immediately purchase the parcel of real estate first offered him at the price first named. He should ascertain the price, terms and other particulars of several like parcels in that and other localities, and compare one with another for the purpose of determining which offers the best investment. He should endeavor so to buy that if he were to sell tomorrow he could sell at a price in advance of that which he had paid; in other words, to buy "under the market."
Sec. 50. When the advantages of a particular piece of property have been pointed out to an inexperienced buyer, and he has allowed his imagination to revel in the possibilities of profit, or his pride to expand at the prospect of hearing the many compliments his friends would express were they to behold him snugly installed in that cozy dwelling, he is apt to manifest symptoms of feverish haste and a nervous anxiety to purchase. The old rule to buy slowly should be adhered to by the inexperienced on all occasions. The intending buyer should disguise his anxiety, if he feels any, think the matter over for a few days, and endeavor to get a clear, calm and unbiased view of the proposition as an entirety. There may become incidental or secondary considerations that have been overlooked. The property may have been offered to others at a lower figure and declined for some reason.
Sec. 51. The rule is that the buyer is bound to use his eyes and ears to discover manifest defects in the thing sold. He takes the risk upon himself where the thing is subject to his examination, as it is in the case of real estate. "Let the buyer beware," is the old maxim. "The law presumes," says Curwen on Abstracts, "that the buyer will never rely on the opinion or random recommendations of the seller; and therefore any representations on the part of the seller, or his agent, as to his own opinion, or as to what others have told him regarding their opinion of the value of the property, or as to the chance of its increasing in value, or as to the probability of its being resold at an advance, even though the seller knows them to be false, do not amount to fraud." An assertion by the owner, or his agent, of a material fact, as, that the premises bring a certain monthly rental, may be relied on, as the misrepresentation of such a fact, if it be a material inducement to the other party in making his contract to purchase, entitles the person on whom it is practiced, to repudiate the contract. An action of deceit will lie against one who makes a false representation of a material fact, knowing it to be false, or when he makes it recklessly of his own knowledge without knowing whether it is true or not, and upon which another acts to his injury.
Sec. 52. The investor should understand that he will oftentimes not be required to pay cash in full when he buys. Occasionally he can buy for one-third cash, and frequently for one-half cash. Banks ordinarily will loan not over one-half of the appraised value of the property, such appraisal being placed on the property by the agent of the bank. Whenever he can do so, the buyer should endeavor, in the event that he is to pay only part cash, to have the seller take back a mortgage for the unpaid portion. In this way, he can obtain a larger loan on the property he is to acquire than if he went to a bank or some private party to obtain a loan. The mortgage should run for from three to five years, and if the borrower thinks he will be able to pay off the entire mortgage before the expiration of that time, a clause can be inserted to the effect that the borrower may pay off the mortgage at any time by paying the interest to the date of payment, and interest for one month additional as a bonus. Where a deal of this sort is made, the seller makes a deed, conveying the premises to the buyer, and the buyer, thereupon, pays part in cash and in evidence of the remainder gives the seller the buyer's promissory note, secured by mortgage on the premises. The deed and the mortgage are placed on record almost simultaneously. Let us suppose the investor to be buying an improved property, yielding an income in the way of rent of $20 per month, or $240 per annum, and that the price is $4,000; that the seller is willing to accept $2,000 in cash, the remainder to be evidenced by the mortgage note of the buyer for $2,000, such note to be payable three years after date, to bear interest at the rate of 6 per cent per annum, net, payable quarterly, or interest amounting to $120 per annum. If the buyer had paid cash in full, the rental of $240 per annum would be equivalent to 6 per cent on the purchase price; as the buyer must care for the taxes, insurance and repairs, his income will be diminished by these items. On the proposition as above outlined, the buyer will receive an income of $240 per annum, and will expend $120 for interest and something for taxes, insurance and repairs, leaving an apparent surplus in his favor. His net return, or rate of interest, on his cash investment of $2,000 will, of course, be less than 6 per cent.