New England Forestry Consultants, Inc.

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When I am preparing to administer a timber sale for a client, it is not unusual for the client to ask me how I plan on selling the timber before I have even designated the timber to be harvested. It is also not unusual to see that look of concern spread across my clients face when I answer "I don’t know".

Timber can be sold a number of different ways, and foresters tend to differ in opinion as to which is the preferred method. Personally, I don’t believe there is a preferred method, and the best method is that which best meets the land-owner’s needs.

The first decision that needs to be made is to determine if the timber is going to be sold through a bidding method or through direct negotiations. Bidding is just as the name implies in that potential purchasers are asked to submit bids for the purchase of the timber being sold. In most cases the high bidder will be awarded the bid; however, all good bid sales will allow for the landowner to reject any bid regardless of the bid amount. A negotiated sale is when the forester enters into direct negotiations with a potential buyer or buyers and negotiates the price that will be paid for the timber. One of the advantages of direct negotiated sales is that it allows the forester to match the logging operator with the prop-erty. Depending on the desired results, there are times when a forester wants to have a specific operator who he/she is familiar with executing the timber harvest because that operator is a known entity. The forester knows the type of work that the operator is capable of.

nefco newsletter summer 2015 timber harvest article imageThere are advantages and disadvantages of each method. The advantage of bid sales is that competition breeds prices. A landowner may receive a higher price for his/her timber simply because various buyers are bidding against each other. Remember, basic economics for the buyer is to buy low and sell high. There is nothing unsavory about that prem-ise and it is a basic business method. Bid sales imply that an individual purchaser is not the only purchaser looking at the timber; therefore, the potential buyer needs to consider that when submitting a bid. Additionally, bid sales tend to reach a broader audience which may result in a higher bid due to a niche market or a specific situation of a potential buyer that is not publicly known. For poor or mar-ginal lots, reaching a broader audience can be very important as it may allow for the opportunity to harvest these poor lots due to the individual circumstances of the potential buyer. Having to show a lot to a potential buyer on an individual basis is very time consuming.

If bidding is chosen as the appropriate sales method, a decision then needs to be made pertaining to the payment method. Is payment to be made based on a lump sum, a series of fixed payments, or is the timber to be paid for as the timber is harvested based on a price per species and/or product.? Again, there are advantages and disadvantages of each method.

While it may appear to be simply choosing between one method over the other, the reality of the situation is that this is usually not the case. Most forest-ers with experience have developed hybrid methods which combines the best elements of each method. Many years ago it was thought that if a landowner wanted the best money for his/her timber, the landowner would have to sacrifice the level of the quality of the logging job. This really is no longer the case. Expecta-tions of loggers have reached the point where high quality work is expected regardless of the price paid for the timber. While there are a few exceptions to this concept, top prices and quality work are not mutually exclusive goals. A good for-ester should be able to develop a sale and payment method that works for all parties and achieves the goals of the land-owner.

I have sold timber in a variety of different ways, and there are even other methods that I want to try in the future. Each method has its advantages and disadvantages, but the most important consideration is selecting a method that best meets the landowner’s needs. Personally, I usually do not make a recommendation to a landowner until I have at least started the process of setting up the harvest on the ground. In addition, I need to understand the landowner’s financial needs and consider the tax implications based on timing of payment. Additionally, the current timber market will have an effect on the selection of the sale method.

So, when I tell my client "I don’t know" it doesn’t really mean that I don’t know because I am ignorant. It means that I am collecting as much information as possible to insure that the sale method will best meet the landowner’s needs before I make a recommendation.