DEAR MR. MYERS: How was property bought and sold in the U.S. during the 1600s and 1700s, before America declared its independence from England?
ANSWER: Frankly, there wasn’t much buying or selling for several decades after the Pilgrims landed on Plymouth Rock in 1620. But with July 4th just a few days away, I’m devoting this entire column to answering some historically related real estate questions.
Land “jobbers,” the precursors of modern-day agents and developers, began to appear in the 1700s. Their primary job was to assemble small, individually owned parcels that could be packaged together and sold in bulk to wealthy farmers.
Smaller sales were tough to make back then, in part because getting credible title to a property was difficult. Even George Washington complained, after paying a 1784 visit to a huge parcel that he acquired before he became president, that the land was occupied by what he termed “squatters,” who claimed to have valid ownership of the same property.
Washington also was shocked to learn that other parts of his massive land holdings were being offered for sale “by land jobbers and speculators” to potential buyers in Philadelphia and even Europe. That suggests that real estate fraud is about as old as the industry itself.
REAL ESTATE TRIVIA: George Washington’s net worth today would be an inflation-adjusted $580 million, thanks largely to the 52,000 acres of farms and other land he once owned west of the Appalachian Mountains, according to an analysis by business news website 247wallst.com. President Donald Trump’s net worth, mostly from his vast real estate portfolio in New York and popular resort areas, is $2.8 billion.
DEAR MR. MYERS: I closed the purchase of my home last month, but just now got around to reading my title-insurance policy. Turns out, one of the restrictions in my neighborhood states that my home “can be sold to Caucasians only.” Isn’t that illegal?
ANSWER: Yes, the restriction is illegal – but you don’t have to worry about it when you eventually plan to sell.
It took more than 170 years after the Constitution was signed, but the U.S. Supreme Court ruled in 1948 that racially restrictive covenants on the sale of property cannot be legally enforced. Sadly, it took another 20 years for Congress to cement the rule by approving the federal Fair Housing Act of 1968.
Several communities and even states still have racially restrictive laws on their books but haven’t bothered to erase them, even though they are unenforceable.
DEAR MR. MYERS: I was interested in the recent tips you provided to help people pre-pay their loans and save money, instead of choosing a typical 30-year mortgage. But who decided that 30-year terms should be the norm, anyway?
ANSWER: President Franklin D. Roosevelt essentially created the 30-year mortgage when he formed the Federal Housing Administration in 1934. The FHA was a cornerstone of his famous “New Deal” plan to help pull our country out of the Great Depression.
Before 1934, most buyers had to make at least a 50 percent down payment on a house or farm that they wanted to purchase. The typical loan term was a mere five years, and it required the borrower to make a massive “balloon” payment to pay the balance in full when the loan term ended.
Despite such flaws, that old system worked fairly well, until the stock market crashed in 1929. Millions of people were soon thrown out of work and couldn’t pay their home loans, which caused foreclosures to skyrocket and worsened the banking crisis.
Even today, historians can’t agree why President Roosevelt and the FHA decided that 30 years – rather than 20, or 37, or whatever – should be the length of their newly created mortgage plan. But it’s clear that FDR wanted to make good housing available through affordable monthly payments for every American, while also providing lenders with some type of government backing to encourage them to make more loans and to protect them against future changes in the economy.
David W. Myers’ column is distributed by Cowles Syndicate Inc.