Setting Up the Timber Sale Yourself
Do
it yourself or work with a forester?
Many landowners are skeptical about employing a professional forester. They believe that using a forester does not add value or that any value it might add is lost in paying the forester. However, unless a landowner is well versed in many of the issues raised on this web site, the services of a professional forester are invaluable. In fact, research shows that landowners working with a professional during a harvest end up with a healthier forest, greater satisfaction in the results, and more money. Here are some ways that a forester can help you meet your objectives and get a fair price:
Forestry expertise -- volume estimation,
timber marking, sale layout, etc.
Market knowledge -- maximized value of harvested
products, local demand for logs, etc.
Experience with loggers -- knowing reputable
loggers, their equipment and communicating the needs of landowners
Sale oversight -- protection of landowners
interests during harvesting, proper implementation of best management
practices and contract adminstration
For more information, check out the UW-Extension publication entitled "Conducting a successful timbersale: a primer for landowners", Wisconsin Woodlands GWQ036.
Surveying the Sale
The prospectus should include a clause allowing the seller the right
to refuse any and all bids. If there are too few bids or all bids are
below what the owner feels the timber is worth, this clause allows the
owners to withdraw the timber from sale. If you are using the services
of a forester, they usually maintain lists of potential buyers and will
mail your prospectus to those individuals. Next, potential buyers send
sealed bids to the landowner. Bidders develop their estimates of the volumes
and values of the site usually by visiting the site and then subtracting
their costs. In writing a prospectus, a “bid bond clause” is
recommended. This clause requires a bidder to include earnest money along
with their bid, to insure the serious intent of the bidder. When the owner
selects the winning bid, the bid bonds of the other loggers are returned.
Timber sales contracts are complex.
To help out woodland owners, a sample timber sale contract is available: http://fwe.wisc.edu/extension/Publications/Contract/ Consulting an attorney and a forester is also recommended.
Determining How Much Volume Will be Cut
The basic unit for estimating volume for both sawtimber and veneer is
the board foot, or 12 inches x 12 inches x 1 inch, or 6 inches x 6 inches
x 4 inches to equal 144 cubic inches of wood. Timber value is often described
in dollars per thousand board feet (MBF). Two tables often used to estimate
volume are the Scribner Rule, a more accurate measure, and the Doyle Rule,
which often underestimates the volume of larger trees.
For more information read "Measuring Trees and Estimating Volume", Lake States Woodlands G3332.
The basic unit for estimating pulpwood volume in trees is the cord. A standard cord is a closely stacked pile of logs containing 128 cubic feet of wood, bark, and air spaces between the logs. A cord of wood is frequently described as a stack 8 feet long, 4 feet high and 4 feet wide.
To determine the volume of wood in a stand of five acres or less, or a tract with highly valuable trees such as black walnut veneer, measure each tree individually and total those volumes. To estimate volumes for larger tracts, take sample plots in evenly spaced areas throughout the stand. A reasonably accurate stand volume can be obtained by measuring the volume of trees in a number of 1/20th-acre circular sample plots (radius 26.33 feet) and multiply by an expansion factor based on the area of the stand and the area sampled. This sampling intensity will usually provide estimates within 20 percent of the actual stand volume.
Lump Sum Sales
From the perspective of the landowner, lump sum sales, in which buyers submit one bid for all designated stumpage, is the simplest way to sell timber. Buyers must determine the volume and quality of timber, and may offer a single payment or several partial payments. Care must be taken when selling lump sum if the landowner wishes to qualify for capital gains treatment. Timber sold lump sum through a business activity is at risk of being classified as inventory in a trade or business. Inventory is specifically excluded from capital gains treatment. If you treat your forest management activity as a business you would be advised to sell your timber as a scaled sale or where the value is paid based on what is removed. If you treat the activity as an investment, care should be taken in selling lump more than two or three times in your lifetime. If you are selling lump sum more than 3 times, you may want to strongly consider selling your timber as a scaled sale.
Scaled Product Sale
Scaled product sales are more complicated. Bids are based on prices per
unit volume by species, product and/or grade. For example, a bid might
include $300 per MBF of red oak sawlogs and $18 per cord of hardwood pulpwood.
Scaled product sales are riskier in that the total value of the sale is
only known after all the products have been removed. The most common scaled
product sale system used on small private ownership is the flat rate method.
Under this system, prices are bid and paid by volume and species, regardless
of quality or final product. Landowners who sell timber frequently use
scaled products sales to retain economic interest and to qualify for capital
gains treatment.
Permits Required
Under state law, anyone harvesting timber (even for personal use except
for firewood, boughs or up to five Christmas trees) is required to file
a cutting notice with the county clerk 14 days before harvesting begins.
In addition, if you are participating in the Managed Forest Law program,
you must notify the DNR prior to harvesting. Other permits may be required
for harvesting near streams or shorelands. Contact your zoning office
or local DNR office for more information.