There are at least five legitimate methods by which the control of real estate may be acquired, viz.: (1) by gift, (2) purchase, (3) exchange, (4) recovery, (5) agency.
1. Control through gift occurs so rarely in business that it need not be seriously considered, for even when a gift is apparently made, some consideration is usually passed.
2. Purchase includes the majority of transfers, and the method of treating these in the accounts is fully considered in the present chapter.
3. Simple exchange embraces but few instances of real estate acquirement; as a rule some pecuniary consideration, or its equivalent, is involved.
4. Recovery. Unfortunately, most real estate offices occasionally find it necessary to recover property sold "on time" under some form of agreement, the terms of which have not been complied with. This involves the foreclosure of mortgages or cancellation of contracts, although it sometimes happens that a purchaser voluntarily reconveys the property gratuitously or for some consideration. In such cases the balance due on the debt, together with interest to the date of recovery, and all expenses for taxes, legal charges, etc., should be included in the cost price. If, however, this cost price exceeds the value of the property, the Mortgage Deficiency account (Section 229) should be brought into use.
5. Agency, as a rule, does not convey title, but it frequently carries with it the management and sometimes the practical control of property owned by another.