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Understanding the Net Recovery Value of Security [Agriculture]: A Legal Overview
Definition & Meaning
The net recovery value of security in agriculture refers to the estimated amount that can be obtained from selling a security property after accounting for certain costs. This value assumes that, in the case of a guaranteed loan, the lender will take possession of the property and sell it at its highest potential value. The net recovery value is calculated by subtracting the costs associated with acquiring, maintaining, and selling the property from its market value.
Table of content
Legal Use & context
This term is primarily used in the context of agricultural loans, particularly those guaranteed by the Farm Service Agency (FSA). It plays a crucial role in determining the financial viability of loans secured by agricultural properties. Understanding the net recovery value can help borrowers and lenders assess the risks and benefits associated with these loans. Users can manage related forms and procedures through platforms like US Legal Forms, which provides templates drafted by attorneys.
Key legal elements
Real-world examples
Here are a couple of examples of abatement:
For instance, if a farmer secures a loan against their land valued at $500,000, and the costs associated with acquiring and selling the property total $50,000, the net recovery value would be $450,000. This value helps both the lender and borrower understand the potential return on investment in case of default.
State-by-state differences
Examples of state differences (not exhaustive):
State
Notes
California
May have specific regulations regarding agricultural loans.
Texas
Different valuation methods may apply based on local market conditions.
Florida
State laws may influence the costs associated with liquidation.
This is not a complete list. State laws vary, and users should consult local rules for specific guidance.
Comparison with related terms
Term
Definition
Difference
Market Value
The estimated price at which a property would sell.
Net recovery value accounts for costs; market value does not.
Liquidation Value
The estimated amount that can be obtained from selling an asset quickly.
Net recovery value considers highest and best use; liquidation value may not.
Common misunderstandings
What to do if this term applies to you
If you are involved in an agricultural loan, understanding the net recovery value of your security is crucial. Consider evaluating the market value of your property and estimating related costs. If needed, explore US Legal Forms for templates that can assist you in managing related documentation. For complex situations, seeking professional legal advice may be beneficial.
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