Selling Your Timber
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Selling Your Timber A timber sale is a serious matter requiring careful preparation. The results of many years of past timber growth are at stake, and the condition of the forest after the sale profoundly affects its productivity for many years to come. Basics to Consider If profit is your primary objective, avoid the temptation to make a “quick sale.” Think about what you are going to do, and don’t be pressured Your best interest should 1. Hire a Registered Consulting Forester into making a decision. Using the competitive bid be the top priority of anyone to Help With the Planning and Sale of process can maximize your profits. you hire to assist in your timber sale. They should Your Timber fully disclose and resolve Selling timber can be a source of great satisfaction compromised. It reduces opportunities for any existing or potential to a landowner. It may also be surprising, frustrating misunderstandings between you and the buyer and/or conflicts of interest. and stressful, especially for landowners who conduct logger, helps ensure the harvest will maximize financial timber sales infrequently. returns for all parties, protects water quality and Relying on the expertise of a registered consulting maintains or enhances forest productivity. Reforestation forester for help with harvest planning and timber sales alternatives should also be planned prior to timber reduces the likelihood that sellers or buyers will be harvests to ensure that the specific harvest methods caught off guard - and that helps landowners get the used complement long-term forest management goals. Tax Implications highest return for their timber. Clearly marking sale boundary lines helps ensure that Competent tax advice should be loggers don’t cut non-designated trees or trespass on sought well before a sale. It is Georgia laws require individuals practicing forestry neighbors’ property. recommended that prior to making to be registered with the state as foresters. To find the sale, you contact your CPA a registered consulting forester, visit the Georgia The use of USGS topographic and NRCS county soil for clarification of the current tax Forestry Commission’s website at www.GaTrees. survey maps are valuable tools that identify streams, laws. org or the Association of Consulting Foresters at existing roads, property boundaries, steep grades, www.acf-foresters.org. To confirm that an individual road access, wet areas and soils that can be easily There are also various sources of is registered, check the Georgia State Board of damaged during the logging process. The use of these information that you can access Registration for Foresters at www.sos.state.ga.us. maps also helps in planning the best time of year to on the Internet. The Georgia harvest, and the potential location of logging decks, Cooperative Extension System, 2. Develop a Forest Management Plan stream crossings, culverts and temporary roads. Areas my-forest.com, the U.S. Forest Properly managed forests yield more timber, have a adjacent to streams should be clearly designated Service Cooperative Forestry, and higher net present value, suffer fewer environmental as Streamside Management Zones, where timber the National Timber Tax websites impacts and provide richer wildlife habitat than harvesting should be controlled or avoided. provide tax information that may non-managed forests. All of the items identified during pre-harvest planning help you better understand the tax Forest management plans are also required for third- should be written in a pre-harvest plan that includes a implications of selling your timber. party certification, including the American Tree Farm map of the timber sale area. Before harvesting begins, System (ATFS), Sustainable Forestry Initiative (SFI), you or your representative should conduct an on-the- Those sites are: Forest Stewardship Council (FSC) and future markets, ground meeting with the buyer and logger to review the • www.caes.uga.edu/ such as woody biomass and carbon sequestration. pre-harvest plan. extension/anr These plans are the first pieces of evidence federal, • www.my-forest.com Potential consequences of not having a pre-harvest state and local regulators examine to determine plan include time and money spent on unintended • www.fs.fed.us/spf/coop/ silvicultural exemptions. • www.timbertax.org problems, degraded post-harvest forest and soil Plan the Pre-Harvest conditions, illegal activities, declining water quality, 3. excessive forest land impacted by skidding, trees more Pre-harvest planning ensures that your susceptible to disease and insect damage, reduced forest management objectives and goals are not regeneration of seedlings and stunted sapling growth. Properly managed forests yield more timber, have a higher net Preparing a contract present value, suffer encourages forethought fewer environmental and planning, which will impacts, and enhance wildlife habitat more than minimize difficulties and non-managed forests. ensure that the transaction meets your expectations. You should always Determine a Selling Method a contract encourages forethought and planning, 4. Timber is generally sold by one of two methods: which minimizes difficulties and ensures that the check with a registered negotiation or sealed bid. You should seek the transaction meets your expectations. A contract is not consulting forester advice of your registered consulting forester to a substitute for good faith and fair dealing between when drafting a timber determine which method best achieves your parties; it is a framework in which good faith and fair harvesting objectives. dealing operate in an orderly and effective manner. sale contract. The following items should be included in a timber • Negotiated sales involve face-to-face bargaining sale contract: between you (the seller) and the buyer. The negotiated sale is used more frequently for specialty products such Timber Description as high-value hardwoods, in which there are typically • An Accurate Legal Description: few bidders. These sales usually involve selling timber State the exact location and legal description of the by the unit; in Georgia, the unit is calculated by timber sale area. the ton for each species and product class (pine • Certified Wood Products pulpwood, hardwood sawtimber, etc.). A price per Landowners who participate in forest certification ton is negotiated for each species and product class. systems should consider including a contract clause A timber cruise by a registered consulting forester to or attachment listing the certification numbers or determine the species, volume and current market documentation associated with the harvested timber. price for each product class is critical to knowing what This provides additional confirmation of participation you are selling. in the certification program. • Sealed bid sales require that prospective buyers submit confidential lump-sum offers in writing for your timber. The Type of Harvest Specify the type of harvest you desire. If the timber is Generally, the sealed bid method returns the highest marked, explain how it’s marked. For example, if you dollar value to you, the landowner, especially if you are making a seed tree cut, you may specify that all are unfamiliar with local markets. Payment is typically Sample contracts are available on trees banded with blue paint 4-1/2 feet above ground made in full at the time of sale, unless installment our website at www.gatrees.org, (Diameter at Breast Height, DBH) are seed trees and payments are preferred for tax purposes. Contracts under the “Forest Management” will not be cut or damaged. If you are thinning or using should be signed and executed, and performance menu. a select cut, you may want to designate the trees to be bonds may be considered. Landowners are required cut with one paint spot above DBH and another below to pay county ad valorem taxes on timber sales. the stump height. If you are doing an operator-select Whichever sale method is chosen, always confirm the harvest, specify selection guidelines in the contract. buyer is a current Georgia Master Timber Harvester Payment, Damage Clauses and Penalties (MTH). A trained MTH ensures that trees are effectively The following are provisions to consider including in a Whether you’re dealing harvested and merchandised in a manner that fully timber sale contract. Be aware that some restrictions directly or indirectly with utilizes Best Management Practices (BMPs). This is placed on harvesting may lower the price prospective a timber buyer, wood particularly important as more emphasis is placed on buyers are willing to pay for your timber. Be reasonable protecting and enhancing water quality. It is a good idea in your expectations. supplier, logger, registered to take time to know the prospective logger by asking for • Selling Timber on a Lump-Sum Basis: forester or consultant, you references, business experience and whether they have (A lump-sum sale is the outright sale of standing timber for a fixed completed MTH training. You or your agent can verify should always request dollar amount agreed upon in advance. The sale price is not a function that your buyer has attended Georgia’s MTH course by of the volume cut.) If you are selling your timber on a references, experience, visiting http://ga-mth.forestry.uga.edu/db. applicable licenses and lump-sum basis, specify that you desire payment in full at the time of contract execution; or if you are certifications. 5.Have a Contract A written contract is essential and will reduce unwanted deferring payment, the exact date(s) you expect surprises for you and your buyer and/or logger. Preparing payment. As important as it is, the contract is only one of many issues that needs to be considered when the decision to sell timber is being made. The following concerns should have a bearing on the content within the contract: 1. Do you have a clear title for the timber being sold? • Selling Timber on a Per-Ton Basis: • Access Restrictions: 2. Have you established your (A per-ton price is determined in advance, but the amount of timber to be harvested Specify any restrictions you have for ingress and egress tax basis for the land and is not.