Six Steps Involved in a Successful Timber Sale

•    Purpose of Sale
•    Identify Area to be Harvested  & Clearly Mark Boundary of Sale
•    Type & Timing of Sale
•    Inventory Products and Volumes
•    The Sale
•    Follow Up After the Harvest

Purpose of Sale
Purposes of a timber sale range from timber management objectives, wildlife management, aesthetics to just needing some cash. At various stages of timber growth, timber needs thinning to keep it growing and healthy. Often there is some type of forest health issue dictating a harvest. The best type of timber stand for a particular type of wildlife may require a harvest to manipulate habitat best suited for that species. We are seeing a growing demand for aesthetics in transition type properties for residential use. Sometimes landowners just need some cash for various reasons and timber harvest is one way to generate income. Understanding the purpose or objective for the sale is the first step in the process to determining what, where, when and how the harvest will be conducted. Many times the purpose has multiple objectives. We then design a harvest or management plan to accommodate these goals or objectives.

Identify Area to be Harvested & Clearly Mark Boundary of Sale
Based on the objective, we identify the area of interest and begin implementation of the management or harvest plan. The plan should clearly follow the purpose for the sale. The area to harvest should be very clearly defined. Sale boundaries should be marked with paint or flagged. A sale map should be available showing sale lines, access, log decks and any special stipulations concerning harvest.

Type & Timing of Sale
The type of timber sale will be dictated by the products for sale, purpose of the sale and the timing of the sale. We have another post under “Interesting Reads” on www.ghland.com that identifies the types of timber sales for you to review. Timing has more to do with landowner needs. Assuming the sale does not have to be immediate, we can time the market, weather and other factors that may have a bearing on timing of the sale. Timing issues can include a glut of timber on the market or, conversely, very little, a dry site that could bring a better price in wetter periods, or a wet site that has to be cut in dry times. There are many factors involved in how and when we market a timber sale.

Inventory Products and Volumes
The type of sale will determine if the timber needs inventorying and determining the volumes of the various products. Usually on high value products of fairly good size, sales needs inventorying so you know what you are selling. The products and volumes are something we like to disclose when we have a bid sale of a clear-cut (complete harvest). Sometimes we do this on a thin or select cut harvest. It is always important to know what you are selling on any type of sale. This gives the buyers an idea of what products are available and the amounts or volumes. We have found they are more apt to provide a bid with good information and a professionally managed sale.

The Sale
The sale is conducted through the bidding process. Sometimes it is a formal bid sale and sometimes it is very informal. The products, volumes and valuation of the sale have a bearing on how the sale is handled. All sales are conducted professionally and ethically whether it is a large or small sale. The buyers present their bids to us of the products and area we have offered for sale. At that point, we determine if these bids are acceptable based on our evaluation of market conditions at the time of sale. If the highest bid is acceptable, we execute a contract stipulating how the harvest is to be conducted along with some other items that need to be addressed with any sale. Any special stipulations need to be provided to buyers before they bid and will be entered into the contract. We handle all the details of the sale, contract and monitoring of the harvest.

Follow Up After the Harvest
After the harvest is complete, we give the final inspection to be certain logging is completed per the terms of the logging agreement. It is then time to plan for reforestation of the harvested area on pine sites. Most hardwood sites naturally regenerate themselves. We consider soils, competing vegetation (both herbaceous and woody completion), seedling type and timing of the various reforestation components. Some pine species are more tolerant to herbicides than other. Certain woody species need specific site preparation. We coordinate all of these management prescriptions for the landowner. By the end of the winter planting season, the landowner will have a newly planted stand of timber growing for future income.

As you can see, there is considerable planning necessary to complete the six steps in a successful timber sale. We have followed these steps on many timber sales of all sizes from 10 acres sales to several thousand acre sales. We would welcome the opportunity to assist you in making your timber sale successful.

We have experienced more activity and interest in land during January and February of 2012 than any past January and February. Why is there so much chatter in the land market? What are buyers looking for?

Our statistics show more activity and interest in January and February of 2012 than nearly all of 2011. Could we be at the bottom of this far too lengthy economic turndown? Something has people out looking for all types of land. We have people looking for small to large timberland tracts to home places to institutional cropland investor types. We have had calls and sold tracts to people from Texas, Ohio, Virginia, Tennessee and Florida.  Not all of the callers are buying but usually is a period of heightened interest before a period of buying.

We are in a time of intense buyer awareness. Buyers are spending considerable time learning everything they can about their target market and shopping hard. This is absolutely understandable after the last four years we have experienced. As a specialist, in the land market, we are required to provide good accurate information about the investment to help the buyer with their decision process. The buyer should require this of a land broker or find one that does have expertise in that target market.

Investing in real estate is more demanding in the current market. Capital is harder to obtain. Loans and credit are scrutinized much more closely. Correct valuation of the asset you are acquiring is more difficult to ascertain. Consumer confidence and the political environment are also contributing factors. There are risks associated with any investment, including land. However, land has always been a sound investment and should be a portion of most people’s investment portfolio.

We are not sure why there has been a spike in activity and interest in land. Maybe confidence is returning and investors want to jump in at what they think is the bottom or want some land as a hedge against coming inflation. We don’t exactly know what is happening but want to inform you that it appears there is a change occurring in our land market. Let us know if we can assist you in your search for land and we hope you have a prosperous 2012.

The true market value is what a ready, willing and able buyer will pay that a seller not under duress is willing to accept. As a land broker, we try to evaluate the property based on the assets on the property, recent comparable sales of similar properties and other properties of like kind that are for sale on the market.

This valuation process has nothing to do with what you paid for your property or what value you want for the property. I have many landowners telling me they paid X amount of dollars for property and they want that amount plus a brokers fee as the sales price. I understand this and appreciate what they want, but buyers are going to research the property and compare it to other properties to find the best deal.

The first part of our valuation consists of breaking the property down into compartments of varying assets from timber type and size, land type, improvements (houses, barns, lakes, rivers, …) and anything we can find that adds value to the land including character. This may include a timber inventory and many other assessments of value. The second part is in a previous blog on our site regarding knowledge of the product and that market (Two Most Important Factors in Selling Land). It is important to know what other similar properties are on the market in that region.  Other available properties do have an affect on the value of your land. Part of our job is to have knowledge of these properties.

Many factors affect the value of land. Green Hill land & Timber is heavily involved in the land and timber market in this region. We understand the process in evaluating land and timber and can help you understand what and why your land is worth what it is. These values do change over time based on economic factors and the value of the improvements. Let us know if we can assist you with your land and timber investments.

Buyers for rural property tend to look in areas other than MLS or Realtor.com. If you are searching for the traditional home buy, go to those sites. They work very well for that market. We have found that many of our leads have come from years of direct mailing and market awareness of who Green Hill Land & Timber is. We also reach outside of our market by participating in several huge networks utilizing the World Wide Web and national organizations that specialize in rural land, farmland, timberland and recreational properties. We have a strong local presence, but also have many non-local buyers contacting us. The ability to interact in both of these markets is hugely important in successful marketing.

Knowledge of your product is equally important in successful land sales. If you are contacted by some of the sophisticated buyers we reach, you must understand all about your product. These types of buyers are usually busy and want all the data necessary to decision making in a brief, condensed package. This means you need a professional with knowledge of the product being sold or you are already at a disadvantage.

Green Hill Land & Timber understands our product and we know where to find the few buyers there are in this tough economy. We specialize in rural land. We have the forestry background necessary to market timberland deals and make them work. When it comes to land and wildlife management, we have developed many properties optimizing the specifics of the landowner’s needs and goals. We understand rural land, what it takes to market the product and where to market your product. We would like the opportunity to help you with your land and timber and make it a successful experience.

I worked on one property about 100 acres short and another 100 acres over what the tax assessor was using for acreage. Some of the older plats are incredibly accurate but sometimes there are inaccuracies. I wrote a stewardship plan for a client and asked him if he was renting the house on his property and if he wanted to thin the pines. Turns out he did not own the house and pines, and had been paying taxes on a house and 30 acres of land for nearly 25 years. The tax office said they would start sending the tax bill to the proper landowner. There was no refund of taxes. The landowner needs to be certain of what they are taxed for.

Rural landowners have another very important tool in reducing their tax burden. There are three tax covenants that can be entered into that will reduce the tax bill. If you have larger land parcels, usually larger than 25 acres, you are eligible for local conservation easements. These easements are designed to help farmers, recreational and timberland owners reduce their tax burden by being taxed on a current use basis rather than a higher and better use valuation. If you live near a city and have 500 acres of timberland that could be used for development, you will pay taxes on a timberland investment. The covenants typically reduce the tax liability by 30% to 40%. Two of the covenants (Preferential and CUVA) are for ten years and the other (FLPA) is fifteen years. If you subdivide or develop property, you breach the covenant and have to pay penalties. There is a little more to it than I have explained but it is a great tool we recommend to many of our clients.

The tax assessor’s office assigns value to different land types based on quality or productivity such as upland, bottomland, cropland, swampland… They also assign value to improvements on your property. The tax assessor does a remarkable job but sometimes there are discrepancies that you can appeal or at least question the chief appraiser as to the accuracy of certain valuations.

One last comment on valuation is that, in Georgia, timber is not taxed annually like property taxes. You pay a severance tax or timber tax when you harvest the timber. This was a very good ruling protecting timberland owners. If you paid taxes on the timber as an ad valorem tax for 30 years and never sold the timber, you were taxed for the value of something that was never realized. In case of storm or fire damage whereby the timber could not be harvested or sold, you still paid tax. Today, you only pay tax on income you actually realized at time of harvest.

We hope this information s helpful in these times when every penny counts. Green Hill Land & Timber, LLC always welcomes the opportunity to help you with your land and timber investments. Please give us a call if you have questions on buying or selling land and timber.

 First, let’s look at why we should thin. Different landowners have different goals which can change the timing of thinning. If you are looking at managing for maximum returns from timber harvest, we tailor our management practices to facilitate growth of sawtimber and/or poles. These products are the most valuable. When figuring in the time value of money, it serves no purpose to grow trees past a certain diameter as you will get no more money for the product. Therefore, we grow trees as fast as possible to get them as large as possible or to the more valuable sawtimber size product.

We plant a certain number of quality trees per acre in order to get good growth and stimulate the natural pruning of the lower limbs. It is time to thin, when you see the lower limbs beginning to die and fall off, tree diameters have reached a certain size and tree height is adequate. You should not wait so long as to lose the proper percentage of crown (tree top) that you loose growth potential. Some soils are better than others, varying the timing of first thinning. Typically, we thin around the age of fifteen years. We will groom the stand again five to seven years later. The purpose of second grooming is to take out less desirable low quality trees and save the best crop trees. Final harvest will be around thirty five years of age.

There are several factors that will influence when we will harvest. First would be stand health and quality. There are times when disease, seedling quality, pine beetles, or fire will dictate an early harvest. In rare situations, the harvest may even be a final or clear-cut harvest to start over. Even though we have provided basic guidelines for harvesting, we can still harvest timber at any time during the rotation or life of the timber once it reaches merchantable size around age 14.

Most timber harvest are a result of sound management that follows the goals of the landowner. Some other management criteria are wildlife management, aesthetics, and sawtimber production. If we are managing for wildlife, we may thin heavier than normal or leave special buffers. Most sawtimber rotations thin at ages 15, 23 and final harvest around 35, as mentioned above. Soil productivity may vary the timing somewhat. We manipulate timber stands for aesthetics based on what the landowner perceives to be beautiful or appealing.

Price deserves a paragraph for itself. Timber is not an annual crop that has to be harvested exactly at a certain age. It does not make a huge difference if we harvest this year or in two years. Most likely, the timber will be fine and remain in good condition. Personal tax preferences or timing of other investments may influence a timber harvest. Price does fluctuate heavily, influencing when we may want to harvest. It is very important for pulpwood thinning to be done in a timely manner to keep stands healthy and growing. The second or final harvest of higher value products should be timed with a good market. Weather will have an influence on pricing, too. Weather can cause a basic supply and demand curve that will produce significant swings in the market price of all products.

Green Hill land & Timber, LLC works very hard to bring all of these factors together in managing our clients’ timber investment. We would like the opportunity to help you with your land and timber investment.