Things to consider when thinking about selling timber.
There are roughly 50,000 parcels of timber in the Upper Peninsula that are owned by private citizens. Across Michigan, there are well over 350,000. The largest block of the state’s forest resource is owned by this ownership group and does not include the two-plus million acres in corporate ownership. Many times, these ownerships are called “family forests”. Much of Michigan’s timber harvest comes from family forests.
Harvesting timber usually involves a whole host of factors. Implementing a harvest not only yields numerous benefits to the owner, but also to the larger society in which we all live. A thoughtful harvest will capture the greatest good.
Here are ten things to consider when thinking about selling your timber.
- Hire a professional forester to help you with the entire process. This includes harvesting within the context of sustainable management objectives. There is more to a timber sale than just the logging. Think in terms of decades, not just a few months.
- The trees are probably worth more money than you think. Don’t accept cash. Don’t accept a single offer. Treat your timber like any other asset worth thousands of dollars. At the same time, don’t expect every big tree to be worth hundreds of dollars. High-end markets have many volatile and variable specifications. Do your homework.
- Always use a written contract. Understand everything in the contract. Think about what may be missing from the contract. Make sure the logger understands everything in the contract. Keep open the lines of communication between you, the forester, and the logger. Most problems are the result of miscommunication, not dishonesty.
- Don’t automatically assume that “select cutting” is good forestry. The selected trees might be only your best trees. This is called high-grading and degrades the stand. The selected trees might be all those over a certain diameter. This, too, is degrading to a stand of timber. Be certain the selected trees are ones that will leave the forest in a better condition, not worse.
- Don’t be frightened if someone mentions clear cutting. Many of our forest types are best regenerated by clearcutting, which mimics natural regeneration methods. Different forest types are managed in different ways. A one-size-fits-all management system doesn’t exist. Learn about the forest ecology on your land and the management options applicable to your situation.
- Make certain that the logger complies with all state regulations, workman’s compensation laws, and has a good continuing education record. Membership in professional organizations such as the Michigan Association of Timbermen or Timber Professionals Association is a sign of a professional logger. Don’t be afraid to ask. Most loggers expect to be asked lots of questions.
- Work with the forester and logger to set up a system of roads, skidways, and landing areas that everyone can agree on. Decide which you would like to be permanent and which you’ll want to grow back into forest or maintain as open areas. Work with the regulatory agencies on stream-crossings. Modify the harvest or set aside areas that you consider special, such as forest along water or sensitive places.
- Make sure a harvest time frame is understood. Specify a beginning and an end date. Decide whether summer or winter logging may best meet your objectives. If you have summer-accessible timber, the stumpage prices are often higher than in the winter.
- Decide if you want a lump-sum or scale sale. Lump-sum is a single agreed-upon amount of money for a particular set of trees (usually marked with paint). A scale sale involves different stumpage values for different timber products, such as logs, bolts, pulpwood, and chips. Stumpage is the amount of money a landowner receives for standing trees. Remember that the logger makes his money on the margin between what he pays for your trees and what a mill pays for his cut products. That margin is often mighty slim.
- Consider the income tax implications of a timber sale. Your income can jump significantly in the year of harvest. The IRS will want a piece of the action. Learn how you can minimize your tax liability. You’ll need to know the value of the timber when you acquired it, the volume at that time, the volume now, and how much volume will be harvested. Keep expense receipts for deductions. Take advantage of capital gains treatment rather than report the sale as ordinary income. Find a tax preparer experienced with the special IRS treatment of timber sale income.
For some, a timber sale can be scary. For others, their timber value and the importance of a well-planned harvest are underestimated. Few owners have more than one or two timber sales in their lifetime. The services and experience of a professional forester lead to higher landowner satisfaction. That means a higher income and a better harvest job. A harvest has long-term effects. Get the job done right. Your children will thank you.
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