WHAT IS THE CURRENT PRICE OF TIMBER?
Once or twice a day one of our offices gets the question in the headline from
a landowner who is considering the sale of timber. Since we probably sell more
open-market timber in sealed-bid sales than anyone, we can provide much helpful
information. But suppose he put the question to one of the very active timber
buyers. What answer would he receive?
To help you guess the answer, we present below the bids we recently received
on two separate tracts near each other:
| 282-acre Tract |
15-acre Tract |
| $882,489 |
$90,924 |
| 777,551 |
85,050 |
| 733,200 |
68,960 |
| 662,000 |
67,647 |
| 654,077 |
56,771 |
| 610,494 |
55,560 |
| 561,204 |
51,890 |
| 526,875 |
51,170 |
| 393,926 |
42,371 |
| 325,367 |
36,000 |
| 280,551 |
Which one of these buyers would you call? How would you know whether you were
asking the highest bidder? If you attempted to negotiate a sale with him, how
could you know whether you got the highest price? Even with four decades of
experience in selling timber, we wouldn't dream of trying to win a one-on-one
negotiation with any timber buyer. We learned long ago that the only way to get
the highest price is a sealed-bid sale in which you furnish detailed information
to all possible bidders.
As you can see by referring to the financial calculations in our lead
article, getting the highest price is vital. In the big sale above, the lowest
bid was 32% of the highest; even the second highest bid was only 88%. In the
little sale, the lowest bid was 40% of the highest. Had we used the prices
offered by the unsuccessful bidders, the return on investment and the plantation
values would have been very disappointing to most investors.
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