Selling timber - is there a 都tandard deal

djefferis · Jul 22, 2018

Ok, looking for some advice.

Recently inherited family farm in Ohio...and have approximately 30-35 acres of woods last timbered in approximately 2000.

Was approached by one operator asking if weå£‡ be interested in selling...no numbers discussed, only that they pay cash up front before cutting begins. Now itç—´ been a while since we last did this, but in the past weè‡´e agreed to select cutting of mature trees and from what I recall the deals were 50/50 split at the mill prices paid.

No need for the $$ upfront - itç—´ all clear profit to us, and IçŸ¥ guessing that an upfront offer is åŠªorst case to the operator- if they do better, they pad their profits at my expense. I also recognize weæ±*e not talking a fortune here...no ones going to be retiring off 30 acres of select cutting and might be hard to get more than 1 competing bid.

Curious though - is 50/50 still they typical deal or do more people just shop the highest bid/best prepared operator (obviously a few less dollars from someone who wonç¨š tear up the property is preferred). Has the oil/gas industry driven down prices any tearing up so much ground to clear pipeline ROW around here.

TIA

dmccarty · Jul 22, 2018

Stop. Do not do one thing with this guy until you do your homework.

Search TBN and you will find plenty of discussions on selling timber.

In NC the following applies but see if Ohio does the same.

The Extension Office has quite a bit of information on selling timber see if you can find Ohio specific information.
We have timber Best Management Practices(BMP) which, if specified in the purchase contract, the logger has to follow.
You would have a contract right?
In NC, timber is sold just like land so there is a contract. The contract can and should spell out what ever concerns you have such as location of logging trails, decking operations, site clean up, etc.
The timber contract is usually limited to two years. The logger has up to two years to get the trees. After that the trees return to the land owner even though the logger has paid for the trees.
What is the current market value of trees? How do you know if what the guy is offering is a good price or not? Here the state tracks timber prices so one can tell if the price is a good price but these prices are very local so a price in the mountains will likely be different than my area.
What is the volume of trees you have and what species? Without this information how can you know the price?

We used a timber agent who measured EVERY SINGLE tree that was for sale. We have a list of tree size and species which told us the total volume of wood for sale. The timber agent marketed the timber sale and then managed the logging operation. He, like a real estate agent, worked on commission so the more money we made the more he made.

NO WAY IN HECK would I sell timber to some dude just knocking on the door. Tis a good way to get ripped off. Seen some very smart people get ripped off by a logger knocking on the door.

We timbered in 2000, and while the trees have grown since then, it is only 18 years. We would not get much value from the trees that have grown during that time.

I would suggest you hire a timber agent to cruise your timber irregardless of your decision to sell. You need to figure out the tax basis on the trees, i.e., what is the volume of the trees right now after you took ownership. This has tax impact. Forresters can go back in time to guestimate the tree volume but one is better off doing it after taking ownership. Since the trees likely do not have much value at the moment, I suspect this will benefit you at tax time but I have not looked at timber tax law in two decades so things may have changed.

Find an accountant who understand timber tax law and a timber agent.

Later,
Dan

dmccarty · Jul 22, 2018

Regarding the actually selling of the timber.

Our timber agent marketed the timber sale to loggers. Part of his value and work was providing a list of tree size, species and total volume. This was used to by the logger bidding on the trees. Some loggers also did their own timber cruise.

The timber was sold on our property just after sunrise one day. It was a closed bid sale and we had about a dozen or so bidders. We took the envelopes and opened them on the tail gate of my truck. We sorted them from low to high and the highest bidder got the trees.

A lawyer then drew up a contract that listed the details of the timber sale, including the location of logging trails, decking operations, road usage, slash handling, BMP requirements, etc.

Some of the bids were very low and just hoping to rip us off.

I have no idea what the saw mill paid and I don't care what the logger did with the trees. They were his after he bought them.

Later,
Dan

atsah · Jul 22, 2018

Good advise above.. Just remember most timber harvesters are thieves, they load trucks in the middle of the night around here for a reason and the reason doesn't benefit the land owner..

Tractor Seabee · Jul 23, 2018

Here in the NW it is 50/50 except exportable fir which is 40/60, 60 for the seller. Sold 56 large tractor/trailer loads in 2013. Big logging company, all machinery, not a chain saw on the site. They treated me as we agreed.

Ron

fishheadbob · Jul 23, 2018

Selling timber is like buying a used car. If you don't know what you are doing there is a great likelihood of being taken to the cleaners. The expression "Babe in the woods" seems appropriate. Re-read DMCARTY's posts as they contain great information. Also ask a tax person knowledgeable about timber sales about proper tax treatment of the money you will receive before you go much farther.

smstonypoint · Jul 23, 2018

Another endorsement of consulting foresters -- Dan nailed it. Regarding taxation, a consulting forester can estimate the value of the timber when you acquired the property. This is the "basis" used in calculating the capital gains on timber sales.

Steve

newbury · Jul 23, 2018

fishheadbob said:
Selling timber is like buying a used car.<snip>

I disagree, it's more like selling a used car, in this case like selling a barn kept mint condition, maintained and running Duesenberg SJ convertible coupe, to someone who just stumbled across it and tells you it's only worth as much as a 2000 Chevy Cavalier that had gotten flooded and won't pass inspection. After all they are both used cars.

We had a 20 acre parcel the wife's family had inherited in south Mississippi (before I met her). This occured about 5 years ago or so. Hadn't been cut in 30 years. Owners ON RECORD were my wife (a Real Estate Attorney), my BIL, a MD with a family practice, and my MIL, then a 89 yr old Southern widow, weighing about 90 lbs. and living alone. All about 250 miles from the property, in north Mississippi.

The "logger" called up my MIL, offered a pittance to clearcut it. I didn't get involved at first until I heard prices. The MIL didn't want me to be involved.
I blew up so they went back and forth, kept getting told things like the trees had been damaged by a hurricane (they hadn't, thanks to recent imagery), prices were terrible (they were not) etc.

And the guy would ONLY deal with my MIL over the phone, despite my wife calling him MANY times, he was never available.

So they finally arrived at a price which I thought was terrible, but they badly wanted to get it cut.

Then the rip-off artist sends the paperwork to my MIL when my wife was not in town. HAD to be signed and sent back IMMEDIATELY or the deal was off, courier was waiting at the door to take it. Luckily my MIL called my wife. Got my BIL to read the papers, the guy had included PURCHASE OF THE LAND!! Where they had agreed to less than $1k/acre for the trees he tried to get her to sign and SELL the land also.

I finally convinced them to get it bid, they got about $4K /acre for the land and the trees.

Jstpssng · Jul 23, 2018

atsah said:
Good advise above.. Just remember most timber harvesters are thieves, they load trucks in the middle of the night around here for a reason and the reason doesn't benefit the land owner..

You're dealing with the wrong contractors if that's your experience. While there are still a few bad eggs around most of them have been weeded out. If you have concerns the Maine Forest Service is very good about addressing them.
To the OP, the advice to hire a forester is the best you will get. Start here http://forestry.ohiodnr.gov/serviceforesters, as this is what you pay taxes for.