Aspiring landowners with goals of buying land at auction have much to contemplate. One of these things includes what to know about timber rights when purchasing land at real estate auctions. If that’s in your future, read on for details on this complex matter, with expert input from a Whitetail Properties and Ranch & Farm Auctions Land Specialist.
Editor’s Note: This is not financial, investment, legal, or real estate advice. Consult with a financial planner, investment specialist, real estate lawyer, and real estate professional before buying or selling land at auction.
Checking for Timber Rights Status. Conducting Timber Cruises to Determine Value.
Those who plan to buy land should know about timber rights. If the timber rights are/were sold separately, the landowner technically owns the soil, but not the trees that grow in it.
“It's as simple as the guy who holds the rights to harvest the timber,” said Dave Skinner, a Whitetail Properties and Ranch & Farm Auctions Land Specialist in Kentucky. “It's as simple as that.”
Skinner explains that this operates similar to mineral rights. The primary difference is timespan. Typically, it doesn't run for 99 years like oil and other things. Instead, it’s a very defined deadline in which they must be done with their timber harvest.
“In modern times, it should definitely show up in a standard title search,” Skinner said. “Anyone selling their property should know, right off the bat, whether they have their timber rights or not.”
The same is true for prospective buyers. They should be able to determine immediately whether timber rights remain attached, or not.
Once this is assessed, it’s time to inquire about timber cruises. This is completed by a forester or other qualified professional. It will determine how many board feet of timber a property has and what the value of that timber might be.
All trees aren’t created equal, though. Without question, from a timber harvest perspective, some of America’s most cherished trees include black walnut, northern red oak, and white oak. Of course, there are others, but these are currently some of the most sought-after by logging operations.
The Commonality of Severing Timber Rights
Most inquiring about the severance of timber rights tend to think it’s more common than it actually is. Rather, it tends to be relatively uncommon. “We don't really see a ton of it here (Kentucky) where a guy is buying the property without the timber rights,” Skinner said.
Sure, it has happened and will happen again, Skinner noted. However, the vast majority of the time, when a property goes up for sale as a traditional listing, these rights are still attached.
“I get that question a lot, but it's not really that common,” Skinner said. “But if you're hiring a reputable Land Specialist, that information will be disclosed.”
Skinner says the frequency of this question is disproportionate to its relevance and the greater importance of more important matters. He attributes this to “YouTubers” and other media outlets citing the “Top 5 Things” you need to know before buying land.
“You know, they're doing all the hooks to get the views on YouTube, and it's always mineral rights, timber rights, and restrictions — all those things,” Skinner said. “All of that uncertainty and unneeded stress can be avoided just by hiring a good Land Specialist.”
Following the Timber Market and Pricing
Timber is a commodity, just like others, such as crops, oil, etc. The market determines its pricing. Supply and demand directly correlate with price tags in stores. Of course, disease, insects, and other elements can impact value positively or negatively, too.
Those who aren’t qualified and trained in the ways of timber management shouldn’t take wholesale stabs at timber valuations, though. Instead, work with trained professionals. Consult a Land Specialist. Work with a forester. Talk to other professionals. Analyze official timber cruises.
Dave Skinner’s Personal Anecdotal Experience
Skinner has a personal anecdotal experience with buying a property with severed timber rights. As previously noted, these same rights reverted back to him after a set period of time.
“I bought a farm a couple years ago,” Skinner said. “I didn't own the timber rights when I first bought it. They reverted back to the owner about nine months after I purchased the property.
“Basically, in years prior, a previous landowner auctioned off the property,” Skinner continued. “The new owner was a sawmill. When they sold the property, they reserved the timber rights for X amount of time after they sold the property. Then, I came along and bought the property from those folks.”
Severing Timber Rights At Real Estate Auctions
Purchasing land at auction is a high-octane environment. Toss in additional rights attached to land ownership, and it gets even more confusing. Oftentimes, timber rights are included in the “bundling” of rights — along with air, mineral, and water rights — tied to owning land.
Of course, when land goes to auction, the timber rights can be sold (auctioned) separately. When it happens, loggers, saw mills, paper companies, and other timber-needy operations tend to be the buyers.
“With traditional listings, we don't see timber rights severed a lot,” Skinner restated. “You see it at some auctions, though. That's a place to really be mindful of it. Because sometimes, at auction, they will sell off the timber rights separately from the land.”
Generally, when timber rights are auctioned separately, there is a contract that specifies what the buyer can and can’t cut. It might be all timber, up to 16-inch stumps, or up to 13-inch stumps. Trees can even be marked for cutting, or protecting, too.
In rarer instances, a seller might reserve the timber rights. Instead of selling the land and timber rights, they might sell the land but keep the rights to harvest timber. This would prevent the new landowners from conducting any manner of timber work prior to the expiration date. As noted, after a determined timeframe, timber rights eventually revert back.
Conducting Due Diligence Before the Land Auction
Those planning to buy land at auction must conduct due diligence before the land auction begins. Do not assume timber rights are in play. Initiate a title search, as this can show if timber rights are leased, reserved, or otherwise conveyable.
Before the auction begins, study the auction terms and conditions. (If it’s vague, that’s a red flag and a good sign the program isn’t where it should be.) Fortunately, Ranch & Farm Auctions prioritizes complete transparency without catches or bait-and-switches. Plus, these can reveal important info in terms of timber rights. Study these details, work with a Land Specialist, and experience firm understanding and a fair auction outcome.
As expected, heavily forested acreages with severed timber rights tend to have significantly lower values. Therefore, it’s imperative to determine whether or not timber rights remain intact. If not, and they now belong to a third-party, such as a sawmill or logging operation, this should impact per-acreage pricing.
Even if the timber rights were sold or will sell separately, don’t automatically write off the property. Instead, understand its updated value and make purchasing decisions according to its new and true market worth.
Timelines to Know If Timber Rights Are Severed
If timber rights are severed, it’s crucial to know the associated timelines. Oftentimes, whoever buys the timber rights typically has 24 to 36 months to remove whatever timber they want. Then, once they're done, those timber rights revert back to the landowner.
“At least, that's the way it's done here in Kentucky,” Skinner said. “It might be done differently elsewhere, but in Kentucky, that's the way I see it.”
Generally, timber rights are managed via timber deeds or timber contracts. These are documents that showcase another person’s or entity’s temporary ownership of the timber. Oftentimes, these specified windows permit them to complete logging operations within three to 10 years, preferably much sooner!
According to most sources, in many states, it’s still possible to buy back the timber rights. Doing so can vastly increase the acreage value.
Buying Land at Auction with Ranch & Farm Auctions
Timber is a fluctuating and valuable commodity. Still, it’s a great thing to own. To outright know what you own, consider hiring a surveyor to completely chart the perimeters, and inquire about a title check, before buying land at auction.
Fortunately, working with a Whitetail Properties Land Specialist solves most issues and clears a path to working with additional resources. Notably, they are equipped with the needed knowledge and will help buyers and sellers alike to navigate the murky waters.
In summary, pay careful attention to the auction terms and conditions. If these do not specifically state that timber rights remain within the property, it’s safe to assume that they do not. Once again, Ranch & Farm Auctions always makes it clear and easy to understand whether timber rights convey to the new owner, or not.
For landowners looking to sell at auction, contact Ranch & Farm Auctions. We can answer questions and help with your auctioneering needs. For buyers hoping to purchase land, check out some of the upcoming Ranch & Farm Auctions near you.