By: Vincent Corrao, Northwest Management, Inc.
The appraisal of timberland is a fairly extensive and involved process. Not only does the value of the timber need to be determined, but the value of the underlying land must be determined as well.
The first step in properly determining the timber value is to obtain an accurate estimate of the timber volume. This should be performed by a professional timber cruiser that has no bias or undisclosed interest in the property. An intensive, statistically reliable cruise will give the best estimate of the overall make up of the timber on the property.
Once the timber appraiser has a reliable cruise, the next step is to determine the value of the harvestable products. The value usually is based on the market conditions within the general location of the timberland being appraised. Unusual spot markets that normally are not part of the local market trend should be used with caution. They may or may not reflect the actual market conditions.
After the total value of the timber has been determined, a thorough analysis of the costs involved with getting the product to market is needed. This analysis requires a complete understanding of harvest systems and their associated costs, road construction, production rates and State Forest Practices requirements. The underlying result of this involved analysis is the net stumpage value of the severed timber without the value of the land.
Under most circumstances, timberland value is based on the net stumpage value of the timber plus the value of the land, when the highest and best use of the land is as timberland. The appraiser will gather information on the sale of timberland in the area to determine the market trend for land. The best indication of the land value is recently sold timberland that has been cut over and shows little or no timber value. Good evidence of cut over timberland sales and comparison of each sale to the subject property focuses the appraiser on the market value of the land.
Confusion in the value of the land begins when the highest and best use of the land can be construed as something other than timberland. When recreation and rural home site development is occurring around the property, the value of the land is affected. The appraiser must take this into consideration when appraising the land. Development indicates that the highest and best use of the land may no longer be as timberland, and the value of the property may no longer be reflected in the value of the timber and the land.