Other factors that make aircraft like this one dirt cheap are that older aircraft (especially the 727) are very loud which makes it difficult to use them in commercial service to areas with noise restrictions. Hush kits are available but they're expensive and don't quiet the aircraft enough to operate some sensitive jurisdictions.
If the aircraft is also near the point where it has to undergo a D-check -- the most expensive kind of maintenance check where the aircraft is very nearly completely disassembled, inspected, and re-assembled -- it would make more economic sense to sell it for scrap than it would to continue operation. The BBC has a great documentary on a BA 747-400 D-check that has been posted on Youtube: http://www.youtube.com/watch?v=x_yHtfGH0nI
If the aircraft is also near the point where it has to undergo a D-check -- the most expensive kind of maintenance check where the aircraft is very nearly completely disassembled, inspected, and re-assembled -- it would make more economic sense to sell it for scrap than it would to continue operation. The BBC has a great documentary on a BA 747-400 D-check that has been posted on Youtube: http://www.youtube.com/watch?v=x_yHtfGH0nI