uct could be sold for by a bid offering.  This method may be used as a starting point for negotiated sales or as setting a final rate for the sale without negotiations or bidding.  Standard rates are an inexpensive method but only a guide and must be used only when they meet the criteria of “fair market value”.  They are use primarily in small volume sales.

Comparison Method

Comparison appraisals frequently provide a cost efficient method of determining fair market value.  Comparisons are made with another sale or sale to determine the value of the sale under consideration.  If there are wide variations or differences in the sale(s) that are being compared, this method should not be used.

Residual Value Method

One objective in discussing this method is to show the many variables in determining the value of standing timber.  This was the common method in determining values of National Forest Timber in the 60’s, 70’s, and early ‘80s.  It starts with the selling price of lumber, subtracts costs of manufacturing and harvesting, to come up with a fair market value of the products from a sale.  It is the simple formula of:

Lumber Selling Value less Logging Costs less Manufacturing Costs less Profit Margin = Stumpage Value

                        (When all costs are converted to log scale)  

Answer to Quiz Question #5:
List 3 factors that affect the market value of standing timber.
Current average stump-to-truck logging costs are adjusted to actual factors on the sale being appraised.
These are:

                Felling and Bucking Costs are adjusted for,
                                Tree size
                                Tree density
                                Merchantable tree defects
                                Slope percent
                Skidding Costs are adjusted for,
                                Net volume/acre
                                Log size
                                Average skid distance
                                Scaling defect
                Loading Costs are adjusted for,
                                Scaling defect
                                Gross 16 foot logs per thousand board feet
Log transportation costs are computed based upon average cost/minute/MBF times the total time it takes to make a round trip from the woods to the mill.  Longer and steeper log hauls increase the cost per thousand board feet.

A sample of a narrative appraisal report, which summarizes the adjustments made, is available from the State Committee and can be used as a handout.

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