As a professional forester, I have managed timberland for large forest product companies over the past four decades. In that role, I purchased timberland on many occasions from small private timberland owners. Most times sellers hired a real estate agent with little or no experience or understanding of the components required to value timberland. Sometimes, though less frequently, the same has been true with certified appraisers, invoking a violation of the Competency Provision of the Uniform Standards of Professional Appraisal Practice (USPAP).
As a Real Estate Broker, there are few property types where NAR Standard of Practice 11-1 applies more than valuing timberland. Standard 11-1 states: When Realtors prepare opinions of real property value or price they must: 1) be knowledgeable about the type of property being valued, 2) have access to the information and resources necessary to formulate an accurate opinion, and 3) be familiar with the area where the subject property is located.
The drivers of timberland value; production index; tree species; tree age, diameter, and volume; availability of and distance to log markets; mills; types of logging systems —are lacking in analysis and how those attributes determine the value of timberland. If Realtors or certified appraisers are engaged in providing value on timberland, the first person they should consult, or recommend to the property owner, is a certified forester who can provide an accurate timber cruise. If the Realtor or appraiser has the tools and experience to analyze timber cruises and stand and stock tables, this may be sufficient to conclude a value. In specialized timberland markets, there are often Realtors and appraisers who are also foresters. Unfortunately, if a timberland owner is not well represented by a professionally qualified broker or appraiser, they will likely leave thousands or tens of thousands of dollars on the table because they relied on valuations by valuators who did not know the worth of a timbered property and could not accurately represent their clients’ interests in a timberland sale.
If highest and best use is timberland, then the value of timberland is based on the revenue it can produce (cash flow), i.e. monetizing the timber and other property values (minerals, water, conservation rights, etc.) in the marketplace. It takes very specialized knowledge and experience to value timberland from a market or investment context.
If highest and best use is rural recreation/development, excess timberland value over and above the required aesthetic baseline stand of timber required should then be considered, thereby requiring a timber cruise. Professionals cannot merely dismiss timber value because they do not have the information. Again, this is a violation of NAR Standard of Practice and USPAP.
As credible professionals, a Realtors and appraiser’s goal should be to give the property owners accurate information that allows them to sell at full value and leave nothing on the table. Hiring reliable foresters or forestry consulting companies or experienced appraisers who have the ability to accurately value timberland is worth the dollars spent. They will be able to estimate the timber volume, what it can bring in the log market, and provide access to loggers for costs, and mills that buy logs, to conclude a reliable stumpage value.
Property owners need to ask about credentials, specialized expertise, and relevant past experience. The time and cost invested in hiring the right timberland valuation expertise gives property owners the data and confidence to accurately price their timberland. This is an investment that will return its cost, often many times over.
Jim Lemieux is a Professional Forester and Real Estate Broker. He has extensive forest management experience and has worked for more than four decades for leading forest products industry companies in senior management positions in the western and southeast United States. He is currently the Principal and Owner of North Star Land Advisors and is an active real estate broker in Coeur d’Alene, Idaho focusing on timberland and commercial/industrial properties. He can be reached at 208.446.6671 or firstname.lastname@example.org.