Timber is a multi-billion dollar industry in the United States. Many timberland owners do not receive the full value when they sell their timber due to a lack of knowledge and/or experience. The #1 question on timberland owners' mind when contemplating a timber sale is "What is my Timber worth"? The only correct answer is that it's worth what someone is willing to pay! A key element in properly marketing timber is to use the best selling method. Three commonly used methods are negotiation, sealed bids and auctioning. You should be aware of any unsolicited offer to buy your timber without checking it out thoroughly. This is especially true if the buyer pressures you to accept the offer quickly.
Negotiation
A negotiated sale is where the buyer and seller establish the price through face-to-face negotiations. This is probably the most commonly used method of selling timber; unfortunately, the timberland owner is at a disadvantage in this situation if unfamiliar with local timber markets. Negotiations can be made with a limited number of buyers to determine the best price, however, most buyers do not like a lengthy negotiation process. If multiple buyers are involved they are likely not to give you their best price initially since they know counter-offers may be needed. Certain specialty products, such as high-value hardwoods and poles, are often purchased through negotiation.
Sealed Bids
A sealed-bid timber sale requires prospective buyers to submit confidential written offers that will be opened at a specified time and place. Each bidder is allowed to make only one bid, and bids are not accepted after the specified time for the bid closing. Upon opening the bids, the seller will evaluate all bids and determine which if any bid is accepted. The highest bid is not always the one that gets the sale. Sealed-bids can bring a varying range of offers, but typically, serious buyers offer their best possible price. Sealed bids are the most common sale method used by foresters.
Auctions
An auction sale requires prospective buyers to examine the timber, harvesting plan, logging stipulations and the cutting contract. All buyers will need time to review the timber and requirements and identify the markets into which the timber will be sold to determine the maximum amount they can offer. Auctions can be held with a reserve price that must be met or exceeded for the timber sale to be final. On the pre-specified auction date, the timber is auctioned to the highest bidder. Under certain situations, auctions can bring the highest returns of any sale method.
Method of Payment
Timberland owners also need to be aware of the different payment methods available to them. The majority of small timberland owners will usually select the lump-sum method if available, however, owners of vast timberlands that use periodic harvests for income may select the "Pay-as-cut" method due to certain income tax stipulations.
- Lump Sum
- All money is paid before any timber is cut. The lump-sum payment is usually the most economical way to sell timber if the volume is sufficient to attract several bidders. If the timber tract is small, less than 75,000 board feet or just a few hundred cords of pulpwood, it may be difficult to get the lump-sum payment method.
- Pay as cut
- The other common method of receiving payment is the "Pay as cut" basis where you receive periodic payments based upon weight or volume scale receipts from the mill when the timber is delivered. With this payment method, the buyer may or may not remove all the marked trees, often leaving low-quality timber that needs to be removed. It is also difficult to maintain a count of how many truckloads are actually removed. However, lump-sum payment doesn't always guarantee complete removal of all marked timber either.
