If you own more than a few acres of forestland in western North Carolina, you’ve probably been approached about selling your timber. Selling timber is something that most landowners do once or twice in a lifetime. While it isn’t difficult to sell timber (because there are many different sawmills, wood dealers, and independent loggers in the area looking to procure wood at the lowest price possible), obtaining the highest available price and ensuring that the harvest operation achieves all of the clients goals is something that takes experience. We communicate with timber buyers, forest service personnel, other consultants, and landowners every day and continuously monitor markets through multiple trade publications and the transactions we handle.
All too often we are contacted by landowners who sold timber without a cruise, or without a contract, who believe that they were treated unfairly. Sometimes they weren’t paid the highest price available for their timber. Other times the logging was conducted in a way that led to environmental harm or reduced potential future timber value. In some cases, more trees were harvested than they were led to believe or BMPs (Best Management Practices) were not followed. Failure to follow BMPs can trigger regulatory actions for which the landowner is liable.
Under the best of circumstances, what a timber buyer considers a fair price based on the economics of his or her mill may not be the best price available. The terms of the sale may be more important than the stated price. There are many variables that bear directly on value. The scale used by the buyer, the species being sold, the specifications at the mills, the different pricing for each species at any particular mill, the average size of the timber being sold, the access, the total volume, overall market conditions and the logging conditions are just a few.
As in any business, not all players are honest. Most landowners do not have sufficient expertise and experience to navigate the waters of a timber sale without the help of a professional forester representing only their interests. For landowners who will only sell timber once or twice in their lifetime, or who don’t understand all of the variables, mistakes can be very expensive, both financially and environmentally.
If we are engaged to sell timber, our loyalty is to our client and only our client. We work with an attorney to prepare a clear timber sale contract or timber deed, and we always monitor harvests to ensure all contract terms are satisfied. We typically proceed in one of the following ways:
Lump Sum Sealed Bid Sale:
This is a great way to market and sell high value sawtimber. After marking (with paint) the sale boundaries, Streamside Management Zones, and trees to be harvested or not harvested, we complete an inventory and appraisal of the timber to be harvested. This way we are able to know the volume and value of what is for sale and recommend a minimum acceptable sales price to the landowner. We advertise the sale, including harvest maps, volume estimates, and contract terms to between 25 and 35 timber buyers in the market area and host a showing of the sale area to explain the details of the sale to potential buyers. At a specified date and time, we open sealed bids and recommend to our client to accept one bid or reject all bids. The landowner is paid full price before any harvesting begins, and the buyer assumes all risk at this point. We monitor the harvest through completion, holding a performance deposit from the buyer in our trust account.
Negotiated Lump Sum Sale:
Depending on the type or volume of timber, location, terrain, or management goals, we will frequently negotiate with buyers who we believe will offer a fair price for the timber, and can complete the job according to our specifications. The marking and inventory process is the same as for a sealed-bid sale. The landowner is paid full price before harvesting begins, and the buyer assumes all risk. We monitor the harvest through completion, holding a performance deposit from the buyer in our trust account.
Per Unit Sale:
Occasionally the best option is to negotiate a sale where a sawmill agrees to pay a predetermined price for each product harvested. We usually choose the per unit method on smaller harvests, thinnings, or other partial harvests. One advantage of this type of sale is the flexibility it affords. You have the ability to add volume to the sale, or to halt harvest at any point without breach of contract. It is still important to know the volume and value of what is being sold. The risk involved in per unit sales is that higher value products could get mixed into loads going to facilities using lower value products resulting in the landowner receiving the lower value rate. Knowledge of what species and products you have to sell, how much of it there is, what mills are paying for those products, the scale they will be using, and what logging equipment is appropriate for the sale are very important.
A similar method is where an independent logger agrees to pay the landowner a specified percentage of the delivered price of the logs. The landowner is paid for the timber as it is cut and delivered, usually every week or two and the buyer assumes possession of the trees as they are cut. This method provides an incentive for the logger to generate the highest price for each product, but increases the risk that lower value products will get left in the woods.
Either way, per unit sales require very close oversight. Wildwood Consulting foresters always monitor the harvest and reconcile scale tickets and settlement sheets to ensure every load is accounted for.