We were recently contacted by a family who had inherited property many years ago and had no idea of the actual value of the timber. Because there were a number of heirs involved, most of them living out of state, none of them had taken the initiative to determine the value of what they had.
One of the heirs contacted us by completing the reply card shown on the opposite page and mailing it to us. We made an inspection of the property and informed him that our initial estimate showed the timber would bring about $850,000. With a great deal of disbelief in his voice, he told us “you must have made an error in your calculations.” He then conferred with the other owners and they agreed to allow us to market the timber. When he gave us the contract to market the timber, once again, he informed us “I have prepared the other owners that the timber sale might not reach your original estimate”. We again assured him that we thought our estimate was accurate.
We prepared the timber sale by making an intensive cruise of the timber, which showed a little more timber than our original estimate. We then marketed it in our usual manner and on the bid date we received a total of over $1,000,000 for the timber.
Our clients were very fortunate. Not just by inheriting a nice tract of timberland, but this was a very high risk tract. The timber was very old and slow growing, making it extremely vulnerable. They had not had any major damage from the hurricanes of recent years, nor any other major storm, fire or pine beetle damage. Considering the risk potential, they were incredibly lucky!
In essence, they had a million dollar investment producing no return and subject to enormous risks. No prudent investor would accept such a situation. However, timber is very difficult to evaluate and the average person can easily overlook a situation like this. What is the current situation on your timberland?
Reprinted from “Forest Management News” Spring 2002, Volume 22 Number 1, published by Timber Marketing & Management of the Carolinas, Inc.