Value Of The Timber?

[Ted Martin]

Not living in a part of the world where timber is a big line item, how much per acre might the trees be worth? Around here you might have one or two nice cototnwoods, oaks or walnuts on a hundred acres which you could sell.

 

[xm39hnu]

David,
Around SW TN we get a lot of this kind of thing. 175 acres with wild timber, most of which is merchantable. What's the value? Well, we find that row crop land sells for about $1,000 to $1,100/acre. We find that land with standing, merchantable, wild timber sells for about the same. Cut over land sells for anywhere between $250 and $800/acre, depending on tract size, topography, geometry, access and appeal. So timbered land is worth $1,000 to $1,100/acre around here -- if it's got merchantable timber. Might go for a little more with exceptional timber; there've been a few timber sales at $2,000/acre.

The HBU is "residential subdivision" only if a market exists for a residential subdivision at present in that market. Sounds like your tax guys are pulling a stunt with that HBU classification. Just because you {can} subdivide, doesn't mean you {should.}

DCF on a ten-year holding period? Upon what data would you base lumber values ten years from now? From what sources would you derive a yield cap rate? How would you project those rates that far into the future?. Hell, even the reversion is a squinting guesstimate that far out. Man, I hope you're getting a better fee than those timber cruisers for this if you're going to do it by DCF. Supporting the assumptions will be a suffering b*tch.

I really think you're "over-thinking" this. I think the correct value is indicated by current vacant land sales having the same HBU and similar timber. It may be difficult with no public records reflecting timber, but that's why you drive the comps (or fly'em, for large tracts) and interview the parties. PITA to be sure, but it should be a well-compensated pain.

 

[Don Clark]

B) David,

A good registered forrester in my state can tell you what timber(any tract size) was worth 50 years ago, and can certainly estimate it's worth into the future as well. But, I would use the K.I.S.S. solution and try and find similar tracts of land(anywhere in the state) that have sold in the past 3-5 years and use that as the basis for the timber portion of your appraisal.I will look for any current sales data I may have in my 2 MLS systems that cover the part of North Carolina that I cover.

 

[Dan Leggett]

I agree with Mr. Clark, KISS, try to find similar wooded land sales. Try to find who appraises for your local Federal Land Bank, Farm Credit Services, and FmHA for your data. Local foresters are also good sources for land sales.

And future timber values can be readily be estimated by the pros. Big time REIT's invest zillions in future yields of timber (Plum Creek buying GP/The Timber Co comes to mind). Plantation pines with only a couple of years growth are in several retirement portfolios in my area. Potential loss from ice, fire, beetles etc is recognized and accounted for in their expected monetary going out yield.

If HABU leans towards timber production don't let the small 50 acre size mislead you. Smaller parcels of timber tend to attract the big players AND the small time timber buyers. More people wanting to buy generally results in a higher bid price.

Don't Do The Math: If you do value 'As If' clear-cut, cite that value only. When I know my report is going to an informed banker for an in-house loan I will attach and reference the timber cruise, but don't then add the timber value back to your appraised value.

 

[David C. Johnson]

Good and interesting advice all the way around, if you ask me.

Thanks, guys.

Don, if you come upon anything of interest let me know at Appraisco@aol.com

Thanks again for your posts.

dcj

 

[Neil Leggett]

First, 20 year old timber can be harvested and does have a present value. Though it has not reached maturity, this type of timber is being harvested nowadays. It can be used for many purposes. Lumber is not the only thing that timber is used for. Being in a rural market, I have done many appraisals of wooded property in the past. Sometimes I had a timber cruise. In those cases, I would look for bareland sales then add the value of the timber cruise to it. However, you need to know and understand the market enough to determine whether or not your timber cruise is valid because once you put it in the report, you are confirming its validity. My wife used to work for Weyerhauser, and I know several investors who buy and sell timber land. This gives me an insight.

Alternatively, just make sure to use comparable sales and say that timber value is included in the price. If I have a property that has 20 year old planted pines, I will look for sales of the same. Again, your connections mean a lot here. I have several investors in this type of property who can lead me to sales of properties with similar stands of timber. These guys don't buy and sell based on cruises. They drive through the property and look at what's there. Then they just guess at the timber value. Usually, if you contact the buyer or seller, they can tell you what they thought the timber value was. What is more important, a timber cruise or what the buyer and seller believed to be true when the price was set?

Also, you need to make sure that your highest and best use is for timber and not subdivision. I have seen some markets where thinned land brings the same value as mature timber land. They do a "residential" cut to thin the timber, then sell off 5 acre lots.

Of course, all I do is commercial properties and land. This is a $1,200 job for me. You may have to pull 20 sales to find a few tracts with similar stands of timber that you can verify. This should not be attempted for a residential form fee.

Good luck and get some help from a land appraiser in a rural area to help you with sales if needed.

 

[David C. Johnson]

Thanks, Neil.

dcj

 

[Serge Paquette]

David,

I use a recorder / dictaphone for field notes too. They are great. Without one, I believe there would be a drop in the quality of my appraisals.

If everyone would just give them a try, this industry would flourish into one brimming with professionalism and integrity.

I’d check TMLS data for wooded versus not.

 

[Verne Hebert]

Great contributions.

I too cannot live without the voice recorders on these assignments.

Demand is the acid test in HB&U. If demand does not exist, HB&U is not for res development.

The size of the tract is certainly a determinant in viablility of harvest.

I also look for sales of like size and harvest density and consider the timber as a part of land value (because the market does).

Interestingly, Dan Legett's comment on not to add in the timber cruise to the land component for a final value. This is my position from experience; I have argued this many times. However, in this area, the appraisal of conservasation easements include the cruise as an add to the land. And if you are appraising property for PLum Creek Timber this is also a requirement by Plum Creek. Structure the appraisal this way or you don't get the work.

In my mind, anyway you shake it out, it is double dinging and should not be included--it is already reflected in the land sale as an inherent component--and that would be either to keep the timber or dispose of the timber; market decision of ownerership.

 

[David C. Johnson]

More good comments.

Thanks.

dcj