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Discounts on Financially-Stressed Farmland Sales in Two Counties of Northern Illinois

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  • John T. Scott

Abstract

Many involved in agricultural finance including appraisers, FHA, FCS and other lenders, sellers, and buyers are aware that forced sale of property usually results in less than fair market value; however, this discount has not previously been systematically measured. This study compares two actual sets of sales during the same time period and same geographic area with similar characteristics: (1) the first set is of financially-distressed sales; and (2) the second set consists of farms sold at fair-cash-market value. The data show that the discount for financially-distressed sales is 28 percent. This clearly is a very significant amount. A subset of estate sales also shows a significant discount. It is hypothesized that the behaviors causing the discounting are the seller's pressing need for liquidity and the seller's desire for a quick sale, and qualified buyers being aware of this quick sale need.

Suggested Citation

  • John T. Scott, 1991. "Discounts on Financially-Stressed Farmland Sales in Two Counties of Northern Illinois," Review of Agricultural Economics, Agricultural and Applied Economics Association, vol. 13(2), pages 277-287.
    • Handle: RePEc:oup:revage:v:13:y:1991:i:2:p:277-287.
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