Evaluating the Illinois Land Market

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Evaluating the Illinois Land Market

Bart Waldon

Spanning over 55 million acres of land area, the majority of Illinois grounds encompass agricultural cultivations with over 72% currently dedicated to corn and soybean farming operations injecting billions into the state economy - more than any other contributor annually.  As the leading soybean producer and second highest corn output state nationally with typical per-acre pricing ranging $7,500 to $10,000 based on rich soil conditions found across Central Illinois especially, the overall DIRECTION of area farmlands values remains strongly bullish. Yet niche rural submarkets exist beyond just harvested croplands, namely idle marginal lands or small residential/commercial developmental plots which can prove more challenging for would-be sellers to effectively monetize. We’ll analyze the Illinois land market intricacies and strategies for owners navigating localized conditions next.

Overview of Illinois Geography

Illinois covers over 55,000 square miles spanning from the Mississippi River across to Lake Michigan. The state has diverse geography with flat prairies and rolling hills in the central and northern regions. The southern tip touches the Ozark Plateau with more rugged terrain. Major urban centers include Chicago, Rockford, Peoria, Springfield and Champaign-Urbana.

The climate is humid continental with warm summers and cold winters. Annual precipitation averages 35-48 inches depending on location. Soil types also vary across the state from rich black soil in central Illinois to clay, loam and sandy soils in other areas. This diversity in climate and soil impacts land values.

Uses for Illinois Land

The main uses for land in Illinois are agriculture, conservation, and residential/commercial development.

  • Agriculture: The rich soils make Illinois one of the most productive farming states. Corn and soybeans are the main crops, but wheat, hay, fruits/vegetables and livestock are also produced. The quality of soil, adequacy of drainage and access to water impact agricultural land values.
  • Conservation: Forests, wetlands and prairie habitats are important for recreation, wildlife and environmental quality. Government agencies and land trusts preserve key natural areas, but may acquire additional lands for conservation.
  • Development: Housing, retail, industry and infrastructure require land conversion from agriculture to developed uses. Development pressure impacts land prices near urban centers.

Understanding the most likely or "highest and best use" for a property helps determine its market value.

Factors Influencing Illinois Land Prices

Many factors drive the complex Illinois land market. Current prices reflect the balance of land supply and demand.

  • Location - Land values vary widely based on proximity to urban centers. In 2019, statewide average land values ranged from $7,000/acre near Chicago to $3,500/acre in southern Illinois.
  • Soil Quality - Better agricultural soils support higher values. Irrigated cropland commands 25-30% premiums over non-irrigated tracts. Quality deer hunting habitat adds timberland value.
  • Commodity Prices - Farm profits drive demand for cropland and pasture. With high corn prices, 2011 saw a peak of $7,500/acre average for excellent soils. Lower grain prices since have softened the market.
  • Investor Interest - Low returns from bonds and stocks may divert funds to farmland's stable income. Institutional investors increased holdings after the 2009 recession.
  • Development Potential - Land suitable for housing, retail or industry garners substantial premiums near growing urban areas. Zoning and infrastructure availability determine feasibility.

Illinois Land Value Trends

Illinois agriculture land values have shown gradual decline over the past decade after peaking around 2012. The Federal Reserve Bank of Chicago reported a 1% decrease in statewide land values from 2020-2021. However, direction and intensity of value changes vary by location and soil productivity.

Urban and suburban regions exhibit the strongest land markets. Chicago metro land increased 4% year-over-year with higher development demand. Outlying areas saw stable to slowly declining values. Poorer quality southern Illinois cropland declined over 3% as low commodity prices limited farm profits. Recreational lands held value better than marginal farmland.

Going forward, moderating commodity prices should continue the softening trend for cropland values. However, limited land supply near cities coupled with a growing population may buoy development lands. Monitoring economic trends and regional dynamics provides insights on the future path of Illinois land values.

Selling Land in Illinois

For landowners, accurately valuing their property's worth means understanding this marketplace. But testing the market to sell land presents challenges.

  • Time - Marketing and selling land takes patience. Enlisting a broker and advertising the property is just the first step. Months may pass before securing a qualified buyer at an acceptable price.
  • Costs - Expenses add up from agent commissions to legal fees and taxes. Unproductive vacant land generates no offsetting income while paying property tax and maintenance bills.
  • Effort - Extensive time and energy goes into preparing the land, arranging access for potential buyers, negotiating offers and closing the sale. Multi-owner family lands pose added complications.
  • Sentiment - Letting go of property kept for decades or generations takes an emotional toll. Navigating family dynamics also factors into sell decisions.

For these reasons, direct sales to cash land buyers offer a simpler exit strategy. Companies like Land Boss provide fair cash offers for vacant land and handle closing details. By selling directly, landowners save time, avoid costs and sidestep the land sale hassle.

Analyzing a Land Offer

When Land Boss or any cash land buyer submits an offer, how can you assess if the amount is reasonably fair?

First understand that direct buyers seek a wholesale pricing level that allows profit potential after costs to acquire, hold and resell the property. Simple online estimates tend to reflect higher retail prices. Instead:

  • Check recent land sales of comparable properties in the county through public records. Focus on land acres, road access and topography.
  • Consult with a qualified appraiser to estimate fee simple market value based on data analysis and valuation methods. Expect to pay their hourly rate.
  • Talk to other land professionals - agents, lenders, tax assessors - about valuation factors in your micro-market.
  • Consider discounted pricing since the buyer shoulders the time and hassle of selling the land in the future.
  • Weigh the benefits of a certain cash sale now against uncertain prospects if you marketed the land yourself.

Most importantly, make sure the offer aligns with your financial needs and goals for divesting the property.

Best Practices for Investing in Illinois Land

When evaluating Illinois land as an investment opportunity, several best practices help ensure success:

Conduct Thorough Due Diligence

Complete a detailed inspection of the physical property and structures. Review property lines, easements, water resources and waste systems. Order professional appraisal and environmental site assessments.

Analyze Financials and Local Market Conditions

Project income potential and expenses over the investment term. Study market trends impacting land values, including development activity and agricultural economics. Get comparable sale data to support valuation.

Structure Optimal Financing

Explore financing options including cash purchase, traditional lending, seller financing or partnerships. Seek most favorable terms based on investment goals, like fixed low interest rates.

Develop a Management Plan

Create a business plan for maintaining and generating income from the land through leasing, farming or timber harvests. Budget for repairs, taxes and management costs.

Mitigate Risks

Address potential liabilities from environmental issues to financial risks. Obtain proper insurance coverage. Explore title insurance to reduce title defects or liens impact.

Understand Legal Obligations

Comply with laws and regulations including local zoning. Enforce lease terms timely. File taxes properly including potential income, property or estate taxes.

Following best practices helps Illinois land investors maximize returns while minimizing risks. Conducting thorough due diligence also provides support for setting a fair purchase price. With sound analysis and preparation, agricultural land can produce stable long-term investment performance.

Final Words

The diverse geography and economy across Illinois creates a varied landscape for land values. While statewide trends show a generally softening market, local conditions drive individual property valuances. For landowners, weighing multiple factors helps assess direct sale offers versus independent marketing efforts. In the end, the land market creates an opportunity to sell, but also requires diligent navigation. With patience and analysis, Illinois landowners can make informed decisions to sell their land on favorable terms.

Frequently Asked Questions (FAQs)

What regions in Illinois have the most valuable agricultural land?

The central region has the most prime farmland, including corn belt counties like McLean, Champaign and Piatt. Northern regions like DeKalb and Kane also have high-quality soils and higher land values.

How much does recreational land typically cost in Illinois?

Quality hunting land or timberland may range $2,500-$3,500 per acre in many regions, compared to $4,000-$8,000 for good cropland. Values depend on habitat, timber quality and proximity to urban areas.

How can I estimate the value of my Illinois farmland?

Gather data on recent per acre sales of similar properties in your county, considering productivity, structures and location. Consult your Farm Service Agency office or an appraiser for help determining value.

Should I sell my Illinois land myself or use a land company?

Selling the land yourself may achieve a higher sales price but requires time and effort to prepare, market and negotiate with buyers. A direct sale to a land company provides cash quickly but at a wholesale discounted price.

What expenses are involved in selling land in Illinois?

Major costs may include the agent commission (6% or more), attorney fees, title insurance, transfer taxes (up to $1 per $1,000 value), appraisal fee, prep for sale and income tax on capital gains.

About The Author

Bart Waldon

Bart, co-founder of Land Boss with wife Dallas Waldon, boasts over half a decade in real estate. With 100+ successful land transactions nationwide, his expertise and hands-on approach solidify Land Boss as a leading player in land investment.


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