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Planning Means More Profit At Timber Sales
MISSISSIPPI STATE -- Many people have no trouble selling used cars, houses and even land, but when it comes to selling timber, it's not easy doing it right the first time without help.
Dr. Dannie Reed, Mississippi State University Extension Service agent in Choctaw County, said a managed timber sale is the way to sell timber and get the best price. This requires an evaluation of the timber, an advertised sale and sealed bids.
"Four small sales of less than 50 acres each in Choctaw County recently received a combined $200,000 more than unsolicited offers from recently visiting buyers," Reed said.
Two years ago, Jimmy Upchurch of the Chester community in Choctaw County took an Extension forestry marketing short course. With this information and help from Extension, he sold 51 acres of mixed pulpwood, pine sawtimber and hardwood logs. He made $10,000 more than the estimated value of the timber, and 78 percent more than a previous unsolicited offer.
"Landowners like me have no idea what the timber is worth and have to get somebody to tell them," Upchurch said.
When word spread that Upchurch was selling, unsolicited buyers began asking to cruise the timber. Upchurch let them, but got a registered forester to evaluate the timber and then held a sealed bid sale to get the best price.
"I never had sold timber before and knew nothing about it until I took the class," Upchurch said. "Without the course, I probably would have sold it like the average person does and gotten two or three people to tell me if they'd buy it and how much they'd give me for it."
Dr. Bob Daniels, forestry specialist with MSU's Extension Service, said because of the value of timber today, it is not unusual for mills to haul logs 80 miles. Sellers should consider a wider potential market for their timber, and advertise to all potential buyers.
"Before they sell, all landowners need an inventory of the timber and an average reference value," Daniels said. "Without that, a seller has no way to judge if an offer is reasonable."
On smaller tracts, a county forester can consult with sellers free of charge and provide an evaluation for management purposes. With this general inventory, owners can estimate the timber's value using market reports available at county Extension offices.
County Extension agents can help prepare the bid advertisement, and county foresters as well as Extension agents can often provide a list of potential buyers. Consulting foresters should be brought in if the sale is complex.
Daniels said on tracts of 40 acres or more, the landowner should use a consulting forester to cruise the timber, make the evaluation and possibly handle the sale.
"At $2,000 an acre, 40 acres of timber could be worth $80,000. That transaction is large enough to justify professional help," Daniels said.
With information from the evaluation, the seller can then prepare an invitation to bid and advertise this to numerous potential buyers. Typically about six weeks are given for potential buyers to inspect the timber and make a bid on these sales.
Landowners have a week to accept a bid after it is opened. During this time, terms are negotiated, such as how long the buyer has to cut the timber - typically at least 18 months - and how will the buyer access the timber. Sellers should reserve the right to reject any and all bids.
The buyer's bid is a loose contract, but the deal is not done until a timber deed is signed.
"The buyer usually puts together a timber deed with their lawyer, and at the point you accept the check and sign the timber deed, the sale is official," Reed said.
Reed recommended following the sealed bid process regardless of the amount of timber for sale. This ensures the seller gets the best price for the commodity they have.
Before a sale is made, have a replanting plan in place. Some buyers agree to replant the land as part of the sale, but Reed recommended selling the timber as high as possible, and then hire it to be replanted. Government assistance is sometimes available to landowners for replanting, and these costs have some tax deductions.
Replanting costs about $80 per acre for pine in Mississippi, but additional costs can range from $100 to $200 more an acre depending on site work needed.
Many details make a successful timber sale, but help is available. Forestry marketing short courses are offered in the spring and fall throughout the state by county Extension agents. Several Extension publications on the subject are also available.
"Increasing the profitability in producing timber and sustaining timber production have been continued goals of Extension forestry programs," Reed said. "There is much more to managing timber than making the sale, but we must remember to make payday count or we may loose the farm."