How should a landowner sell his timber?

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How should a landowner sell his timber?

Timber that has commercial value as determined by local standards and local buyers is referred to as merchantable timber (“merch”). Trees that have no commercial value — due, perhaps, to their size, age, conformation, quality, species or location on inoperable acreage — are classified as, non-merchantable. Merchantable value in each trees varies according to its end use—veneer,  saw logs, chipandsaw (C&S), poles, ties, pallet wood, chips, pulp or biomass.

A landowner interested in selling his trees has to determine prior to any sale whether his woods contain merchantable timber, how much, of what end-use type and its estimated value.

Such determinations should be prepared for the landowner by a private-sector consulting forester in almost all cases. A state-employed forester or one employed by a mill may be used in some instances, but my experience has been that landowners are generally best served by retaining a private consultant with a substantial record of local timber sales and no particular ties to any one buyer.

Loggers often buy timber directly from landowners. Sometimes the landowner benefits from such an arrangement. But, again, my experience is that landowners almost always get less for their merch in this arrangement than they would through other sale methods.

My usual recommendation to a landowner is to retain a consulting forester to conduct a sealed-bid, competitive sale. The forester will provide the landowner with his estimate of the owner’smerch timber that is to be sold. This might be done through a forester walk-through, cruise or what’s known in my area when mixed-age, mixed-species (MAMS) hardwoods are offered, as a “marked sale.”

With MAMS hardwoods, the landowner’s forester typically paints stump and butt (two dots, about four feet apart) every tree that is to be sold. The forester then tallies the volume in every painted tree, grouping saw logs by species and diameter class with separate tallies and values for higher value veneer and low-value pulp. Lower value stumpage is generally sold by the ton; volume in higher-value stumpage is typically sold in board feet.

With even-age, one-species sales, like planted loblolly, the forester won’t mark individual trees to be sold. He will provide bidders with information on stand ages, thinning history and estimated tonnage. He will also comment on any quality issues in the stand and other matters that would affect harvesting.

The consulting forester will obtain current stumpage prices for the type of trees he’s marketing through contacting likely bidders and other buyers in the area. A consulting forester’s track record with these buyers counts for a lot. Foresters who are known to puff their inventories will not have many bidders or get good bids.

With a marked sale, the landowner knows exactly what he’s selling and has an estimate of what his forester thinks it’s worth in the current, local market. If the bids are too low, he can hold his timber and try again.

Bidders will visit the tract and make their own volume estimates and valuations.

I’ve generally seen the lowest sealed bids in a marked sale come from independent loggers who plan to cut and then sell to one or more mills. The high bid usually comes from a mill, but I’ve seen mill bids vary widely.

Each mill bids on the basis of its own market situation. A mill with low stockpiles and good orders for the timber being sold will bid high, because it needs the stumpage. High stockpiles and few orders will produce a low bid, or no response.

Competitive-bid sales are not the rule in every area. Buyers often prefer negotiated, bilateral sales, absent a competitive process. In many places, a landowner may only have one buyer for his timber.

Landowners can become knowledgeable about what selling their timber involves. But unless the sale is small or overwhelmingly simple, I would not sell my own timber without involving a consulting forester to represent my interests. My personal experience suggests — and the academic research confirms — landowners net more sale income after paying a consulting forester than they do through other methods available to them.

Landowners should research and question foresters they’re considering. Rosters are available from the Association of Consulting Foresters, Society of American Foresters and state forestry agencies. I favor using a forester who has had at least 10 years of recent experience representing private landowners in the sale area.  Landowners should make sure they understand exactly what a forester is doing (and not doing) for them, and what it will cost.

I like foresters, and I like working with them. I’ve come across a couple of duds, but my overall experience has been positive.

About Author

Curtis Seltzer is a land consultant, columnist and author of How To Be a DIRT-SMART Buyer of Country Property, available at Curtis-Seltzer.com where his columns are posted. He also does commentary for Virginia public radio. His new book, Land Matters: The “Country Real Estate” Columns, 2007-2009, which includes 14 commentaries on CD.

8 Comments

  1. I have represented two clients who tried to sell the timber on their own to loggers, and both deals went sour in a hurry. One had their property just destroyed with lots of stumps, tops, and limbs strewn everywhere. One owner was promised a new gravel road through his land. What he got was a dirt road that veered off onto the adjacent owner. He ended up not making any money on the sale of his timber because he had to pay the adjoining owner for damages to their tract.

    AlaLandCo recently opened a timber bid division where our registered forester, Kyle Ingalls, helps do exactly what you referenced in the article above.

    I would caution owners to be very careful and check references for the forester or logging company. I always like to see a tract they have done, and see the crew place a sign on the land saying “This timber was cut by ….”

    Good article Curtis.

  2. Pretty good advice Curtis. I am a proffesional, licensed forester but I am a buyer and not a consultant. I buy a lot of timber, of which 5% is handled by a consultant. My customers have not complained about the price paid or the work performed in either case. The consultant will cost you 10%. I can tell you from many years of experience, if you take multiple bids, you will not get 10% more if you use a consultant (buyers will not pay more), but you will have representation, someone to take the bids and monitor the harvest. The seller must weigh his options and then dicide to FSBO or pay a commission, just as in selling RE. I would reccomend getting bids from a licensed forester/buyer and not a logger. The loggers is an expert in cutting trees and delivering a product, not buying the trees.

  3. Curtis Seltzer on

    I have not looked at the academic research for several years, but when I was writing How To Be A DIRT-SMART Buyer of Country Property I looked at the studies comparing returns for different methods of selling timber. Competitive bids using a consulting forester netted more to the landowner after deducting a 10 percent fee than the alternatives.

    This doesn’t mean that in special circumstances a bilateral negotiated bid will not net more. Lots of factors affect bids and prices.

    My experience lands on the side of consultant-run, competitive-bid, marked sales for MAMS hardwoods. Where there is only one mill/buyer for a sale sales, you can’t do a competitive bid.

    I don’t challenge Mr. Cann’s comments. I’m simply saying we have different experiences. Curtis

  4. “But unless the sale is small or overwhelmingly simple, I would not sell my own timber without involving a consulting forester to represent my interests”

    So,what is considered “small”?

  5. Curtis Seltzer on

    A small timber sale might be less than $3,000 to $5,000. On the other hand, if you’re selling six veneer trees for that amount, I’d hire a forester on an hourly basis for advice. Curtis

  6. I am a certified forester (hence the C.F. after my name), a land manager, a land broker, and a timber buyer, so I found this discussion very interesting.

    It is important to recognize that forestry is very regional. What works in my area (North Florida) may not work in Kentucky or Alabama. Nevertheless, I can tell you that the single most important factor in selling your timber is to find out about the timber buyer. I subscribe to the Society of American Forester’s code of ethics, and I always try to look out for the landowner’s best interests. If I treat the landowner with respect and provide quality service, then that landowner will refer me to another landowner, and I will have a repeat customer, and new customer, and two new friends. This can only be achieved if I meet landowner’s exceptions, understand their objective, and treat them fairly. It does not make sense to do anything else. Unfortunately, there is no licensure requirements for loggers, and as with most other business, one can always end up with a con artist. This may be what happened to Jonathan Goode.

    Mr. Goode said that he “represented two clients”. I would like to know more about what that means. Is Mr. Goode a forester? Did he select the two loggers? There is a very clear distinction between working with a logger and a forester.

    Jody Cann’s comments are spot on. I agree with his financial analysis. Personally, I am indifferent to whether a landowner uses a consultant forester or sells it himself. We do buy timber from consultants and I value their business. However, we pay the same price for the landowner’s timber regardless of whether or not he uses a consultant. Obvious the landowner must pay the consultant his commission resulting is less net money, but this is the landowner’s decision. My only “beef” with consultants is their consistent scare tactics about how bad things will be if the landowner does not hire them.

    As for Curtis Seltzer’s comments, I supplied data for a now famous Master’s thesis back in the 80’s that compared returns for selling different methods of selling timber. Please note that the data came from consulting foresters. I was one of them.

    Finally, recognize that what worked three years ago is probably no longer valid. Until this recession stated, timber buyers obtained their timber money from the mills, a local bank, and/or their own working capital. After the recession started, the mills cut off all financing and the banks withdrew all lines of credit. The timber company’s costs started to increase as their margins decreased which resulted in a decrease of working capital.

    A landowner will most likely have problems dealing with an individule logger, but will rarely have problems dealing with a reputable timber company. Take your advice from a forester. Most counties have a State forester, and I suggest using him or her. Your State forester is free and will be unbiased. To those who own timber, enjoy your land, your timber, and your investment. May the forest be with you.

  7. As a logger / buyer I think sometimes consultants and r.f.s use scare tactics of bad deals to preserve their own agenda I’ve heard just as many complaints against rf’s as I have logger buyers when a forester buys timber they become a broker they take piece of a shrinking pie with no land investments or equipment investments loggers are not idiots they can answer most landowner questions a buyer can’t work for free the man that sweats to pay for the land or equipment pays his salary I would guess that most landowners didn’t acquire land by notbeing able to negotiate their own deals

  8. Do you know any experienced consultaant who does just consulting in Ocala, FL. area? I have 10 acres on a paved road with a tall pine trees plantation.
    Thanks
    Victor

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