Timber Appraisals
A timber inventory and appraisal is the necessary first step before beginning any forest management or silvicultural activity. This report will provide information on the quality, quantity, kind, and size of timber, which allows us to calculate the current, indicated "fair market value" of all merchantable timber and trees standing and situated upon the property. It should also include information on forest cover types and acreage, soils, wildlife, historical or cultural sites, access to the tract and within the tract, and forest product markets in the region.
If the timber and trees are not merchantable, or precommercial, it is still possible to calculate their "fair market value". The numbers, kinds, and sizes of the seedlings and/or saplings are determined, on-site. Then, based on the these stands and their site index, a yield table is used to "grow" the trees through some standard rotation length, usually to economic maturity (~16 inches dbh for pine and 24 inches dbh for hardwood). The resulting income from thinnings and final harvest is discounted to the present using an appropriate interest rate, which produces a net present value (NPV) for the current timber or trees on the property. It should be stressed that using an appropriate discount rate is most important.
This "fair market value" then becomes the timber basis for the property. Any income received from future timber harvests can be reduced by this amount, thereby reducing the amount of taxable income.
The bare land should be valued separately from the timber, due to its intrinsic value and a much larger regional, or even national, market.
Notice that "fair market value" is shown in quotations. That is due to the definition of "fair market value" and the requirement that seller and buyer not be "under undue pressure" to either sell or buy. When a tract of timber is professionally marketed by a forester using a sealed bid process, we have found that the actual selling price exceeds the timber appraisal value by finding that one buyer who IS "under undue pressure".
When is a timber appraisal needed? Whenever someone is buying or selling property, before gifting timberland, when establishing an estate or settling an estate, when selling timber, or when investing in timberland.
An inventory and timber appraisal by Timberland Associates also includes information on the small trees, shrubs, woody vines, and herbaceous plants that occupy the midstory and understory. This gives the landowner a more complete understanding of the vertical structure and species diversitiy of the property, which can affect wildlife management considerations or silvicultural recommendations. It can also be quite informative as most landowners are surprised at the diversity of plant life found in Tennessee and Virginia.
An initial inspection of the tract is FREE to the owner. Some, or all, of any subsequent timber appraisal fee is refunded should we be selected to perform a timber sale or prepare a forest management plan.
Contact us, or call Tom at 662 837-0381.
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