Cutting timber before selling land may increase profit margin

By Jim Griffith
Registered Forester #1616

I just finished an appraisal for an estate. The family recently inherited the property, and now must decide what to do with their new asset. They no longer live in the area and will not be moving back to the farm.

Their first question regarded selling the land. Before they could answer that question, the timber question came up, or should I say the timber questions. These questions included: How much timber value do we have? Can we add this value directly to our land value? Should we sell our timber and land together or separately? Should we sell the timber before we sell the land? The questions seemed to go on and on.

This particular tract in question had several distinctly different types of timber stands, of which only one had any significant value. In this case, the timber stand with significant value was a pine stand that can be improved by a select-cut thinning operation. We can take the pulpwood, sweetgums and the like, and then some of the pine sawtimber and poles. Trees with at least half the timber value will be sold and removed from the property.

Although a significant amount of the value and more than half the number of trees in this stand are being sold, we are actually improving the property. The remaining trees will be of a better overall quality, and the land will be opened to the view so one can see the lay of the land more clearly. This type of cut often helps the land sell faster.

We employed a land appraiser to assist with this appraisal. Based on his experience and what we see in our own timber management and real estate sales, we concluded that conducting an improvement timber sale that would remove half the timber value would not reduce the overall value of the land.

Hypothetically, if we have a property appraised for a given amount – say $300,000 -the bottom line is that we are going to sell a significant amount of timber – lets say $50,000 – and still get the same amount for the sale of the land, $300,000. Good management and timber knowledge increased the estate sale from $300,000 to a total of $350,000, an extra 17% overall for the sale. This increase more than pays for the cost of the sale and still puts a significant amount of extra money in the owners’ account.

Are you selling land? Does it have timber on it? Have you considered selling the timber before selling the land? It is something to consider.

Jim Griffith is the general manager of the Georgia Farm Bureau Timber and Real Estate Companies.

Georgia Farm Bureau News – May 2006

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