VARDAMAN VIRTUAL FORESTRY COMPANY

The Most Direct Link to Knowledge Workers in the Southeast Forest Economy

©Warren A. Flick
May 15, 2000

E-mail alerts, real-time quotes, and cellular technology are closing the gaps of time and space between people and their stocks. TV images say it all: a young executive, wind in her face and hurrying along a crowded city street, receives an alert and calls in buying or selling instructions, all within a minute or two. She might be in Atlanta, her broker may be in Miami, and the market may be in a collection of computers in the Northeast. Is such a vision transferable to forest land and timber?

Markets generate wealth. The simple acts of buying and selling enlarge wealth. The hard facts of markets—the laws regulating exchange, the machines used in communication, the methods of executing a contract, and the technology used to acquire information relevant to a transaction—largely determine what transactions are possible and economical. Electronic technology has greatly reduced the costs of transactions such as buying and selling stocks and bonds, applying for a loan, buying a book or CD, among others. Technology reduces both the cost of acquiring relevant information and the cost of executing a trade. It thereby induces more buying and selling, both by inducing existing market participants to trade more and by attracting millions of new participants.

New Data Online

It may offer a similar future in rural land and timber. When a person buys land, he buys a fixed location, the value of which is influenced by what goes on around it, perhaps even for hundreds of miles out. Computers and networks offer real advances in acquiring, storing, and analyzing locational data. Forest products companies, consultants, and others are increasingly familiar with these potentials. Rudimentary maps are available online to anyone for free. Government agencies, often universities, allow online users to select different overlays of data. It is now possible to sit at home in Arkansas and acquire a truly staggering amount of information about locations in Alabama or Georgia.

James M. Vardaman and Co. and perhaps others host Internet sites that give landowners the ability to post information about property—land and/or timber—for sale. It's possible to describe the land, to post estimates of timber volumes by diameter and species, to describe the operability of the tract, any restrictions on ownership, and so on. Typically the seller posts a time at which bids will be received, sometimes by email. Real estate firms similarly use the Internet to post descriptions and photos of homes. Car dealers post information about cars.

It may not yet be possible to execute land or timber sales over the Internet. There are problems of identifying and authenticating signatures and documents, and it isn't clear how the law may treat documents sent via the Internet. But with the growing use of encryption, passwords, and pins, it would not be rude to forecast that land contracts, and then perhaps deeds, may be executed online in the future.

It may even be feasible to put all county land records online. As the historical record of such data deepens, a lawyer may search a title without ever visiting the courthouse.

The vision of the young executive on a windy city street may be replaced by a forest owner walking through his woods while taking a cell call and executing a land contract on part of the farm that has been in his family for generations. The buyer may be in Tampa, Florida, hankering for a place in the country, and wiring a down payment to an attorney in Atlanta who holds it in escrow. If the title search could be done online and if deeds could be executed online, the transaction could be completed in an afternoon.

More People, More Money, More Technology

It's not hard then to imagine a basic land transaction in cyberspace. Even now much preliminary information about property is available online, and that gives sellers access to thousands of new potential buyers who may be located anywhere in the world. This makes markets more efficient and helps buyers and sellers extract more value from transactions.

Technology also offers opportunity for buyers and sellers to communicate, form alliances, and work toward joint goals. Interest groups do this effectively now with fax machines and email. Similar potential exists for contracting in land. A group of buyers, united under the banner of an organization for environmental improvement, may deal in land from a distance.

Or land and timber interests may be aggregated and securitized as in a real estate investment trust, limited liability company, or partnership.

Still other transactions may fractionate interests in land. Land is highly variable, and each tract has its unique features or attributes, most of which vary in value to various potential users. Rural land sometimes begs for divisions of rights. One party may want to grow timber, another may want to extract oil, a third may want to foreclose residential development, and a fourth may want to hunt deer.

This kind of land fractionation may occur without ever changing the boundaries of a tract. Low-cost, online information and contracting in cyberspace make such fractionation more cost effective. Hunting leases and deeds to mineral rights are old forms of such fractionation. Conservation easements are a newer form. Through online advertising and contracting, could landowners market bird watching, firewood cutting, small garden plots, or classes in plant identification? Could some of these become leases or permanent easements?

Timber markets may witness similar change. Timber sales can be posted to the Internet, either by landowners or consultants. Jim Vardaman’s Internet site already offers this service (others may also—it’s difficult to keep up with the Internet). Buyers, either manufacturers or wood suppliers, can bid. Other Internet companies might offer forest products mills the opportunity to post wood requirements by species and time periods. Suppliers could bid for contracts to deliver specified amounts over defined time intervals. Some mills might post prices for delivered wood and accept any that comes through the gate. This would give small landowners the option of harvesting their own timber and selling the logs.

It's impossible to foresee the step-by-step development of e-land and timber transactions. Complete e-land transactions, for example, may be years away. Timber and land advertisements on Vardaman’s site are here already. Other creative people seeking new business opportunities in land will try still other approaches. The transactions costs for interests in land will gradually shrink, and the set of persons owning varying interests in land and timber will gradually grow.

The person alone in his woods, clutching his fee-simple title, confident in his ability to exclude all on-comers may give way to many people holding varying and elusive rights to use land at certain times, in certain ways, and for certain purposes. Through efficient, low-cost contracting, private property seems to be evolving into a more shared or more public ownership. Not everyone will embrace such a future, but it is hard to imagine that anyone can stop the onslaught of more people with more money using modern technology to pursue their dreams against a fixed amount of land.