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Tho Raal,tuBtrueBook of CatilonNio

RoBERT B. DUNLAP
S.tfet@!/ OaklM.l Rea1lt Boord
78 The Real,tuBk& Book of Cdwernie

The Exchange
Bg RoBTRTB. DUNLAP

The Conswnnafte Art-Most Inuobed Phose ol Reolta


Deal,ins - Each Transacti'vtl CompUcated,- Co'n'fuo1)ersies
Frequent-The Etxch&nge a ValaableSel\)xce

N exchance is the most consummatereal estate transaction-the


verv acnie of real estate aft. A true story we believe will best
illustrate the point.
.{ was bumed out in the San Francrsco
of attempting to. rehabilitat€ his business,t}Ie successof
""iv "i,i,"i*it]i"!rchent
6re. Inst;ad
which was harrassedby the growrh in popularily of the auiomobjle
he decidedto try real eskle. Beforestading, however.he soughtthe
advice of a real estate friend and said, "I s?nt io go inl,o the real
estate business and to star't frcm the gaound up-what shall I do
fiIst?" "Collect rerts" was the response. So he first collected rents
and when he had to his satisfaction mastered that branch of the pro-
lession he again presentedhimself to his friend, and said, "What-shall
I try next?; "Ti'y the ssle of lots in a sub-division" vas the advice.
He covered in time sub-divisions on his own account of both city
and country lands, built andl sold houses,conducted auctions, negoti_
ated leases'and touched intimatelv on all phases of the real estate
business. IIe then presentedhimselfto hjs friend with the statement:
"What shalt I do now?" "Nox/," said the friend, "you are qualified
to handle exchanges-they r-equire pedection."

MOST INVOT,VEDPHASE OF REALTY DEAI,ING

There is no angle of the real estate business so involved as the


exchange. A br"oker to be successful in this fielal niust have a
thorough knowtedge of real estate and a resourcefulnessbordering on
maerc.
In its simplestanalysisaD exchangeis a transactionin which one
side agreesto lrade properly for t}le hold;ngs of another. Il the
properiy is clear and the trade madeon an equalbasisthe problemis
tdost simple. In such casesthe only thing the broker would have to
rememberwould be to have both sides.with the knowledgeand con-
sent of each,agreeto pay the customarycommission,it being the rule
in an exchange to pay commission on both sides of th€ transaction
Suchcommission,however,could not be collectedunlessboth sidesin
t writing agree to pay the same.
The Realt! Blue Booh ol Calilomio,

DACII TEANSACAION COMPLICATED

In its simplest form an exchangeis rare. It is when incumbrances


to property, when new financing is necessary,when one side or
other tries to v.ithdaaw during the negotiations, that the resoulce-
of the broker is strained to the utmost and wh€n knowledse
the real estate business and strategy fivaling a gen€ral's alone save
situation.
Becauseof its complexity the exchang€ is a most fruitful field for
ersy. Every trader has two piices, a cash pdce and an €x-
price;that is, he is usually willing to sell fot less for cash.
, if he later discoversthat he has rec€ivedproperty of less
than his inflated price and for some reason ol other has become
with his bargain, he imm€diatelya,ttemptsto placehim-
in statusquo on the groundthat the value of the prope*y he re-
vrasnot as represented.
Again a party may have property that is proving a burden, or
s may adse that make immediateliquidation imperative. A
solves the difficulty by exchanging such property for income
. rcpresentjngthe value of rhe laitef pmperry to be worlh a
igure on an income basis. no other represenlalionsas to value
made. However, if later thp partj acccpting such prop€rty dis-
lhat it will not bring in thp open markpl ihe pricp placedupon
he is heardto complainand claim misrepresentation.

CONTRO!'ERSIDS FAEQUDNT
Many exchanges cover property located in diffprent parts of the
or county. Confusionoften arises in suchtransactionsfor th€
that one side or the oth€r may not be conversantwith values.
I inquiry or valuations by real estat€ boards would obviat€
essconfusionand bitter argument.
Many brokers refuse io enter the exchange 6eld because of thc
floversy which seemsincident to it. An analysisleadsthe writel
believethat in most instancesargurnentarises becauseof misrep-
madeto the broker by the parties seekingto trade prop-
. The broker's statementsare merely the representationsof the
and he is usLalb guilfless of altempling to boost thp in-
of an apartment houseor the earning power of a ranch. I{e
the speechas it was pronouncedto him," often "trippingly on
tongue,".perhapspainting a picture that the facts will not bear
'but the r€presentationsare made honestly and in good Jaith.
many traders take as gospeltruth the facts as por-
by the broker and hold him arcountablefor any over-state-
'trcok"
applying to him the ter1lr when as an act of self-protec-
he attempts to draw a contract that will absolvehim from the
efrectof any statementshe may makeon behalf of the principals.
avoid just such unple^santnessand notoriety the exchange is taboo
many offices.
It is to be rgrptted lhat tha pxchanseis a favored fiFld for Lhc
pulous real estate dealer. The very complexity of the subject
l s t o t h i s c l a s . ,f o r l h e r e a r p . u m a n \ ' w r ) s I o c o n f u s et h r l l h e
niti€s seem unlimited. Through the manipulatiou of loans,
80 Tke Eeatrt!BLueBooL af Cahforni4

misreDresentatiotrs as to values, and a hunclred and one other ways,


orDy; trader has unwittingly given bis property away.

THE D(CHANGE A VAIUAII,E SEB'IIICE

It might appear from the above that ihe exchatrge is of little


vafue. nishtly ilsed ihe exchaoge is a medlium of Feat g!od. It
makes DosJibleth€ movement of properl,y that might otherwise stag-
Date. Very oftetr it is possibleto !|4tchlroperty to Eutual adv4htage
when no transaction could result othervise. lror rnataDceule exctrange
of a lot as pat'ment orl a house msy afford the builder a ch&nceto
<hsroseof a house and give the lot holder aD opportunity to possess
a liome, The exchr"ngealso afords a. facile way for the farmer to
move to the city and back to the countly again at his pleasure.
I'he exchanse has oDe great advaDtsge in that business may be
best in this field wher it is at its lowest ebb in all other real estate
depar[ments. In slow times property itsell becomesa -medliufi of
barter atrd lranv a realtor oweshis very existenceto tre iaal lnat ne
was a.bleto live throush a lean period by reasonol the commi$ioh
be egttreclfrom an occasionalexchangr.
. Possibly the greatest tsatisfaction to the exchange b$ker is the
lorowledeeihat hJ is workins in the highest realm of real estale art
I'he genius will find here a rich field for the emplo!'melt.of .a[.his
talenl. and our advice is that only Lhegenius enter' lor the Drader'
like the poet, is born and not made.

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