OVERCAPITALIZED LAND 25 



The following case of C. L. Smith a true story is typical of 

 many transactions in country real estate which are now being 

 made every day throughout the entire United States. In the 

 year 1907 C. L. Smith, a renter on an Illinois farm, decided to 

 move westward and buy land in North Dakota. The Illinois land 

 at this time, of good farming quality, was selling for $150 an acre, 

 whereas the Dakota land, of equal fertility, was selling at one- 

 third or one-fourth, or even one-fifth that amount. It should be 

 added also, that much Dakota land of an inferior grade was on 

 the market at prices ranging from $10.00 to $40.00 an acre. Mr. 

 Smith, upon his arrival in North Dakota, was taken in charge by 

 certain real estate agents. These agents had arranged for the 

 conditional purchase of a farm of six hundred and forty acres at 

 $20.00 an acre. This farm the agents then sold to Mr. Smith at 

 $31.50 an acre, and Mr. Smith, thinking of the one-hundred-and- 

 fifty-dollar land, considered himself the discoverer of a bargain. 

 He had been deceived, however, as later developments proved. 

 This land, in common with other land in this community, was 

 considered by the actual owners to be worth about $20.00 an acre. 

 Allowing the agent the commission of $1.50 an acre (a $960 com- 

 mission), Mr. Smith should have paid $21.50 an acre. Instead of 

 that, he paid $31.50, or $10.00 an acre too much, a total excess of 

 $6400 on the section. The agents on an investment of $12,800 

 made a profit of $7360, or a net profit of 57 per cent. Mr. 

 Smith paid $4000 in cash when he bought the farm, and gave 

 a mortgage on the farm for the balance. The farm had been 

 grossly overcapitalized. It was consequently impossible to carry 

 the load. This meant one of three possible courses: (1) submit 

 to foreclosure proceedings, and lose the land and much of what 

 had been invested in it. This frequently happens. (2) Renew the 

 loan, thus shouldering the same burden for another period of 

 years with no more hope of ultimate success. (3) Find a new buyer, 

 ignorant of conditions (commonly spoken of as a " sucker") and 

 sell the land to him at $50.00 or $60.00 an acre. This course would 

 permit Mr. Smith to recoup his losses and retire with a profit. 

 The mortgage was foreclosed before it was due, and Mr. Smith 

 estimated his net loss on the deal as $5,000. When asked to suggest 

 some remedy for this system of merchandising land, Mr. Smith 

 wrote, in language more forceful than grammatical, as follows: 



" I had enough to pay for one hundred and sixty acres. That is what is 

 hurting this county, because some of the agents are fleecing the men that 

 come here with a little money. They overload them with land and when the 



