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Forestry Assistance

Timber Sale Guidelines for the Private Woodland Owner Many of Michigan’s 180,000 woodland owners at some time face the decision of making a timber sale. It is an infrequent experience for most and they are unfamiliar with timber sale methods. Selling timber requires the same thought and care as the sale of any other crop or product. Too often, timber is sold at too low a price because of poor information on how to sell. Reputable timber byers are always ready to pay a fair market price for timber but the seller must know what s/he is selling to get the interest of good buyers. It is not possible to recommend a single method which will apply to all ownerships because each sale is different. The following suggestions are offered to assist the woodland owner in making decisions. Do not sell on impulse, or without giving reasonable thought to the transaction Peer Pressure: It is wise not to yield to the pressures of a timber buyer who insists on buying immediately. Generally, a month, six months or even a year will make little difference in a timber sale. Quality Pays: It pays to sell only when you have mature trees of good quality, or when you wnt to improve your forest land by removal of trees which are no longer growing vigourously. Know What Is Yours: Be certain of your forest property lines and boundaries before proceeding with your timber sale. Decide on what will be sold Stumpage (standing trees): This can be stated in terms of numbers of trees, kinds, species, sizes, acres, board-foot volume and marked trees, or a combination of these. The local DNR area foresters, consultant foresters, industrial foresters and Conservation District foresters are available to advise what should be cut. Cut Products (logs, pulpwood, posts, etc.): The owner who wants to cut his own timber and sell the cut products on the site or delivered to the buer should be sure of the market before cutting. This method of sale requires a careful study of the log sizes and grades needed by the various markets. No timber should be cut until definite specifications, prices and a purchase agreement have been received from the intended markets. Decide on the method of sale Lump Sum: This method is convenient for both buyer and seller. For the timber being sold for harvest, bids should be requested from as many buyers as possible (minimum of five). A list of timber buyers is available from your local Conservation District. A “lump sum” bid is the total amount the bidder is willing and able to pay you for the trees you are selling. TOTAL PAYMENT SHOULD BE RECEIVED BEFORE ANY TREES ARE CUT... see "performance bonds". By Scale or Piece: Sale by this method is satisfactory when the seller has complete confidence in the buyer, can do the scaling himself, or hire it out. In all cases, the specifications for the products and the procedures for scaling should be thoroughly understood before cutting begins. In both of the above methods, the sale price is usually determined by competitive bidding for your timber by a number of buyers. Competitive bidding establishes fair market value. Do not award the timber contract unless you have at least three to five bids for a fair comparison. Performance bonds A performance bond compensates the seller if the buyer causes unusual damage, cuts trees not in the sale, or desn’t remove the bought trees within the time limit of the contract. The bond is an advantage to the buyer since he doesn’t have to pay for the timber until just before cutting begins. The bond is in addition to the bid price and is returned to the buyer as soon as the logging is completed to the satisfaction of the seller. A performance bond is a percentage of the bid price paid when the bid is made. For sales uner $2,000 a flat rate of $300 is adequate. Otherwise, the bond should be 15% of the bid. The bond is usually a certified check made out in the name of the seller and the buyer. When the contract is signed the bond is put in a local bank savings account with an agreement that it becomes the property of the seller if it is not withdrawn during the contract period plus one month. Any interest accumulation on the bond is the property of the buyer. Both the seller’s and the buyer’s signatures are required for withdrawal except for the above condition. If there is a contract dispute, the money remains in the account until the dispute is settled under the terms of the contract. Price Determining Factors A timber buyer’s financial situation, need for timber, length of haul, and estimate of tree volume and quality are some price determining factors. Other important price determining factors include accessibility of the timber and the ease with which logging operations can be conducted within and around the woodland. The season of the year will influence price also. The current supply and demand situation for timber products is the final price determining factor. Seeking Bids Before seeking bids, you should set a date and time after which you will no longer accept bids. This will discourage “sandbagging” and help to eliminate prospective buyers who aren’t really interested. It will also help to move your sale along promptly. When setting your “cut off” date and time for bid acceptance, be sure to allow prospective buyers sufficient time to inspect the timber (from four to six weeks). Do not deviate from the “cut off” date and time which you set. To do so would be a disservice to both yourself and to the interested timber buyers. You should also decide whether to ask for sealed or oral bids. The sealed bid approach is more business-like. It allows each buyer to make one, and only one, bid. Sealed Bids: These should not be opened until the exact “cut off” date and time which you have already established. To be fair to all parties concerned, no further price negotitations should be undertaken after the bids have been opened. You should ask prospective buyers to write “Timber Sale Bid” on their envelopes. This will prevent any accidental opening of those envelopes before the designated time. As a courtesy to the unsuccessful buyers after the sale, you should inform them that the timber has been sold. Oral Bids: The oral bidding procedure is less formal than the sealed bid procedure. Oral bids can either be accepted up until the “cut off” date and time, or an oral auction can be held at that date and time. However, an oral auction sale should only be conducted when very high timber values are involved and buyer interest is keen. In oral bidding, bids are usually built on earlier bids and this may result in your receiving a higher price than you would receive by using the sealed bid method. However, it obviously penalizes the early bidders. Often times, early buyers will not make an offer if they know their bid will be disclosed. When seeking bids, inform prospective bidders of the following: Location of the timber for sale Type of bid you are seeking (lump sum, by scale or by piece) Method of bidding (sealed or oral) Address where the bids will be received and opened The “cut off” date and time for bid acceptance Type of contract to be used (always written) If the timber is marked (include a listing of the trees by number, species and volume) If the timber is being sold on another basis (all salable trees, trees >16” diameter, etc.) INCLUDE THAT YOU RESERVE THE RIGHT TO REJECT ANY AND ALL BIDS Whether or not you will require a performance bond from the purchaser to guarantee faithful performance of the conditions of the contract. If so, how much. The bond should be sent with the bid. Sign a Contract Sell only under a written contract which includes all terms and provisions of the sale. This insures the transaction will be carried out in a business-like manner. Both buyer and seller should be protected. The buyer and seller should work out the terms of the contract in advance so it is well understood by both parties. Reliable buyers will welcome a contract. Do not hesitate to seek legal assistance if necessary. After the contract is signed, notify the other bidders who the contract was awarded to and return any voided performance bonds. NOTE: Sample contract forms and bid forms are available from the Benzie Conservation District. Call our forester at (231) 882-4391 for more information.