Timber Values In The Appraisal Process
Our appraisal and forestry experts often receive requests from landowners looking for a timber appraisal. One of the first questions we’ll ask is, “What is the need or intended use for the appraisal?” It’s not uncommon for us to hear they have recently received a real estate appraisal and now need to know the value of the timber so they can add the two values together. This perceived need may come from statements in the appraisal similar to “no estimate of potential timber value was made.” This is a valid limitation of appraisals that use the market approach to valuation where the subject property’s value is derived from comparison with similar properties that have recently sold on the market.
This limiting statement about no estimate of timber value would be more appropriately stated as “no specific or separate standing timber value was determined, although the contributory value of the potential timber resources on the property was considered when analyzing the comparable sales.” Buyers and sellers that set the market for properties that contain timber value take into account this value when they agree to the transaction price, and it is those market transactions that are used as comparable sales for the subject property appraisal. In simpler terms, the value of the timber is already accounted for in the market pricing. As such, it is inappropriate to add a timber appraisal value on top of a real estate appraisal using the market approach to value as it essentially counts the timber value twice.
With our unique appraisal and timberland market expertise, we will recognize when a subject property contains a unique timber value resource. Our team will then be able to determine the best appraisal methodologies to assure the value of the timber is appropriately accounted for in the real estate appraisal. For more on timber values in the appraisal process see: steigerwaldt.com/forestlands-and-timber-value
-Tom Hittle, Senior Vice President: Project Coordination/Client Services