When I returned late Friday night from a business trip, I had a message from a new client. He’d found 300 acres with a functional house on a mix of timberland and old fields at about $500,000. He wanted me to help him research it in advance of making an offer.
I talked with him on Saturday morning. We agreed on what I should do and the pay. He struck me as a decent, knowledgeable individual in his mid-50s who was looking for a place to retire in a few years. He lives about eight hours from the property in question. I live about a three-hour drive away and knew some folks in that county.
I started immediately, reviewing the legal documents and timber cruise the seller’s broker provided. I saw nothing in the deeds that were yellow lights—the minerals conveyed with the surface; no easements; no problems with boundaries; no acreage issues or disputes. Most of the property was covered by a recorded survey; a small parcel had been tacked on five years ago.
The timber cruise was different. The seller’s forester had counted all the volume in 12 and 14” diameters as fully priced sawtimber. The majority of sawtimber volume was in these two classifications. The cruise showed about $65,000 in merchantable value. Deducting the phony value of the 12s and 14s, I came up with maybe $30,000 as the real merchantable value of the property’s timber. I asked this forester whether local mills paid full value for 12s and 14s and which specific mills they might be. He did not respond to my email, which answered my questions.
I checked out the dirt with the USDA NRCS soil scientist in the county. The dirt would easilyperc if things came to that. The site indices for the timber dirt were between 60 and 80 for red oak, as the marker species. This was fair to good productivity, and better than I expected. The site’s characteristics fit my client’s long-term timber plans.
I put a phone call into the county’s sanitarian to determine whether the house was hooked up to an approved septic system, and, if so, its capacity, age and design. A cess pool or a pipe straight into the creek are not approved septic systems.
I looked into comps, to see whether the property was priced at market. The seller had about $250,000 in the property over ten years and was asking about twice that. I checked out tax-assessed values, adjusting as necessary. The asking price was in the ballpark, and the client and I talked over an offering price.
On Monday morning, my client phoned the broker. He was informed that another offer was coming in. My client then called me and said that he wanted to get an offer in too. He asked me to help pull the offer together.
I found a local lawyer. I liked the guy. Lawyers hate getting cold-called from people they don’t know and asked to start doing work on the assumption that the client will pay. But I provided enough information to make this lawyer comfortable. The broker used his own contract that was, the lawyer said, heavily biased in favor of the seller. We came up with a contract that protected the buyer.
I emailed the broker at 11:34 a.m. on Monday. I introduced myself, telling him that I was a consultant, not a broker or agent, working on an hourly basis and had no claim on his commission. In addition to asking him some questions, I wrote:
[My client] has hired me to help him research the [property]. In your conversation with him this morning, you indicated that an offer had been submitted.
[My client] would like to submit an offer as well. That is what we will be working on today and tomorrow.
We need to know the time limit on the other offer so that we can get ours in front of the sellers at the same time. So, the first question is, how much time do we have to submit an offer?
…[my client] is prepared to submit an offer without a financing contingency….
I followed this email with several phone calls, all of which went unanswered. My client and I were puzzled. The broker did not seem interested in seeing a second offer. I emailed the broker again, later in the afternoon. He said by email that he would respond at 4:30 p.m. That deadline passed. I phoned again, asking for him to contact me that night.
I phoned again the next morning. The broker informed me that the seller had accepted the other offer on Monday. He did not say whether the seller had been informed that my client’s offer was being prepared on Monday [and was ready on Tuesday morning]. His reason for not communicating with me or my client on Monday was that his secretary, he said, had the swine flu.
What conclusions might be drawn from this broker’s behavior? I don’t know the facts on his side, only that he knew my client was getting an offer together and that he stone-walled that effort until it was too late.
My client’s lawyer had seen similar behavior from this broker in the past.
We were angry. My client’s offer was close to the asking price and would have contained a vanilla house-inspection contingency and a timber contingency. We already had a good sense of the timber value.
An all-cash offer close to the asking price with a buyer who would have paid the asking price was blown off by a broker who was supposed to be acting in the best interests of the seller. While the buyer got screwed, it’s likely that this broker also screwed his own client, the seller. Two offers would only put the seller in a more advantageous position.
A buyer in this position can complain to the state’s real estate board or the seller directly.
But few of us like to get mixed up in something that’s likely to be a big, time-consuming mess. So my client moved past.
This broker pulled a fast one, in my opinion. And I’m still grumbling about it.
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I enjoy reading your articles and appreciate your knowledge and experience. I am a land broker and forester in SC, and I can see why you may have had problems with this deal. I believe your buyer may have been treated unfairly, but the broker may have been very uncomfortable talking with you. The buyer or their attorney should have made the calls to inquire about making an offer. In SC, and many other states, you must have a real estate license if you are representing the buyer. You were definately in violation of our state’s law. You also accepted pay for giving forestry advice. Our state requires that you must be a forester to do that. I know this will not make you and your buyer feel better, but maybe this can be handled differently in the future. I don’t recomend that you practice forestry or real esate without a license, but if you do, be sure to let the buyer call the selling broker and the forester. Oh, I pay full price for 12″ and 14″ pine sawtimber!
I am in complete agreement with Mr. Cann from S.C. It really bothers me, too, as a licensed Georgia Forester and a Georgia Licensed Real Estate Broker that you are getting paid by the hour for “consulting” on a land deal. Also, not all mills skimp on payment of what is known as chipnsaw, also you didn’t say which species they were in your report. No offense, but in the future you should clarify things like that. I can appreciate your stance as a self-employed business owner, but the articles that you publish have no bearing on what goes on in all or many states. This sort of information should be clarified so that the general public is well educated on laws where you live and do your consulting. In this time of great economic stress being in business is hard enough without clouded misinformation in articles on the web. Oh and we make sure our clients get paid for their 12s and 14s, too.
Curtis: I have been involved with the timber industry-primarily in WV. for many years and all of the mills that I have sold timber–and the normal forestry practice –is that all merchantable trees 12″ dbh and larger in diameter with a small end diameter of 10″ are counted as saw timber.
I have seen many times where the good ole boy system works for friends and family. The broker in question was probably looking out for himself or somebody he knew,the buyer you were representing just showed up unexpectedly. I was recently offered 44 acres that joined my farm by an auctioneer/owner for $110,000.00. I did not not buy the property.One month later the owner sold the 44 acres and a ajoining house on an acre and one half for the same price of $110,000.00 to a local lawyer.I am an out of state land owner and I know that the lawyer can throw some business back toward the auctioneer.
I too have enjoyed your articles and comments. However, I feel obligated to inform you that by representing a client in a transaction and by accepting compensation for that representation, irregardless of your background and experience, you are in violation of TN state law as well. You must either be an atty or a licensed real estate agent in order to legally represent a client in a transaction. The license is not that hard to get and with your experience it should certainly not be an obstacle and it would give you credibility in future dealings.
In your defense, I must say that the broker was not acting in his clients best interest. It is a violation of the code of ethics to not present all offers and he at the least should have returned any and all calls promptly. It would appear that the broker was trying to protect his own interest and putting his commission in front of his clients. If this is the case he or she was obviously in violation of multiple ethics codes. Without knowing more of the facts it would be hard to make a fair judgement. Oftimes we have 3rd parties that like to get involved in transactions that really have no interest or business and they simply tend to muddy the waters and create obstacles where there is none… That is still no excuse for his neglect. Wayne Rutherford, Broker Crye-leike Realtors
Thanks for your story.Apart from government and environmentalist how sad is the life of a land owner.
In he Soviet Union there were no landowners to begin with and “sadder “people in the end.The way we go we will “sadder” also.
I disagree with those who believe Curtis requires a license to perform due diligence for a buyer at an hourly rate. I sell more transitional and development land than timber but regulary deal with buyers who have paid consultants in the form of engineers, landscape architects, permit expiditers, and general contractors. Curtis did not hold himself out as a real estate broker at any point during his work on the contemplated purchase. He did not perform any of the tasks normally associated with real estate brokerage, namely locating the property (the buyer did that) or preparing and negotiating the contract (the attorney did that).
The other asset a broker brings to a transaction is the experience of many, many deals and the wisdom to know when a listing broker “isn’t acting right.” An experienced land broker can see a problem coming a mile away and has the instinct to address the issue head on with a time-tested technique or trick of the trade. Here’s the trick I would have used:
In Georgia, a listing broker is required to submit all written offers to the seller. When I think a listing agent is trying to keep my offer on ice, I’ll have my client sign a quick and non-binding letter of intent and then either hand deliver, fax or overnight it depending on how quickly I think it should be received. I’ll then follow up with as many call as it takes to get the listing broker on the phone to remind him that the license law requires him to present my offer to the Seller as soon as reasonably possible.
If Mr. Seltzer’s client had hired an experienced land broker as well as a consultant, I believe he may now be the proud owner of 300 acres. Mike Fitzgerald — Fitzgerald Land & Commercial Realty, Atlanta, GA
Let me start with a reply to Mr. Cann’s comment.
I am not a licensed real-estate broker or agent in Virginia or anywhere else. I make this plain on my website. I inform every client that I am not a broker or agent and do not provide such representation and services. The client in this example had contacted the seller’s broker directly and on his own initiative, and brought me in later for research and help.
I operate a consulting business that helps buyers research and analyze investments, usually land-based real estate. For this work, I am paid on an hourly basis. I do not share in real-estate commissions owed to brokers or agents, working for either party. I am not paid by brokers. I am paid as a consultant by the buyer. This consulting work is no different than any other consultant a buyer might hire to assist in evaluating a property.
I do not “represent” a client. I do not have an agency relationship with a client that would allow me to “represent” a client as brokers and agents do. I do not negotiate on behalf of clients.
I am not a professional forester. I do not do cruises, walk-through estimates, mark timber, market timber for timber sellers, negotiate contracts for timber sales, represent timber sellers or buyers, etc. etc. I have, on the other hand, bought timberland property for my own account and with partners for 40 years. I have reviewed hundreds of timber cruises and have worked with dozens of consulting foresters. I have written extensively on how buyers should get up to speed on how to value stumpage and timberland. LandThink has carried a number of columns during the past year that lay out ways that buyers should research and analyze timberland investments.
I always advise buyers to have a consulting forester do a walk-through or a cruise (the choice is the forester’s) before submitting a contract offer on timberland. ALWAYS. I advised the client in this instance to place a results-acceptable-to-buyer timber contingency in his offer that would allow him to have a consulting forester go on the property and check out the merchantable timber value as well as all the other issues that foresters keep an eye out for. I have said offered this get-a-forester advice in the book I wrote, columns I write and include it in every conversation with a client looking at timberland.
I have looked at timberland properties around this particular county in recent years. I have sold timber from my own properties in both Virginia and West Virginia that are two counties away from this particular county. I am reasonably familiar with how timber buyers — loggers and mills — value hardwood timber of the type shown on the cruise done for the seller. I told the client that in my experience buyers would either not pay for hardwood stumpage in the 12 to 14″ DBH classifications or discount their offers in light of the fact that half the volume on the tract was in these smaller classifications. But I also told the client that I was not a forester and did not know what the local practices were, which was why I suggested that he include a timber-evaluation contingency that would allow him to hire his own forester to do the evaluation. My experience is that smaller diameter HW logs are fully valued as sawtimber in some places and not others. Only a forester working in that area would have the contacts and knowledge to make that judgment. That is what I told the client. There was insufficient time to get a forester on the ground to do this work before submitting an offer, which, again, is why I advised the client put in a timber contingency.
I did not know then, or know now, whether the seller-supplied cruise erred in including 12s and 14s. My opinion then, as now, was that I doubted timber buyers would pay full price for those diameters. Sometimes a buyer will pay full price for a small high-value species like cherry or sugar maple. I have not seen this happen with low-value species like hickory or sycamore in this area. Whether buyers in this county would pay for these smaller diameters was not my call; it was a forester’s call. I told the client that I thought the small-diameter volumes were bogus, but I did not know with certainty whether my opinion was right or not. Whether the merch value was $30,000 or $60,000 was an estimate that a forester had to make, not me. I told the client to be skeptical of the cruise valuation until it could be independently confirmed. That is not practicing forestry; it’s telling a buyer to get professional forestry advice.
Mr. Cann says that he pays full price for 12 and 14 pine sawlogs in South Carolina. I’m pleased to hear that. The property had a small mount of pine pulp and no pine sawlogs in any diameters. Mr. Cann’s experience is different than mine.
I did not practice either real estate or forestry without a license in this episode. Mr. Cann’s accusations are not founded in fact.
I asked the broker representing the seller by email to tell me how much time the client had to submit an offer before the window closed. The broker had already spoken to the client that morning and was aware of his interest, but not that the client was developing an offer. The client asked me to contact the seller’s broker because he was not in his office on Monday and was traveling. I informed the broker that I was not acting as an agent or broker on behalf of the client, was being paid hourly by the buyer and had not interest in commissions due brokers or agent. I was simply trying to get a question of fact answered. Which was not. I told the broker that I was helping the client research the property in advance of submitting an offer and that I was helping the client find a local lawyer, which the client asked me to do.
Buyers are not prohibited from hiring consultants to help them evaluate properties. Consultants need not be licensed brokers if they don’t act as brokers and provide services that only brokers are allowed under the law to provide. I understand the limits that I work within and have no interest in acting as a broker, agent, forester, accountant, lawyer and financial planner, among other professions. The buyer and his consultant are not prohibited from evaluating information provided by the seller, gathering information and becoming knowledgeable about a property’s assets, liabilities, uncertainties, potentials and risks. This is research and analysis. The buyer is not required to have a licensed broker help him research and evaluate properties, though he is certainly free to do so. I often recommend that buyers involve a broker/agent to represent them in a purchase.
I have no problem with brokers and foresters policing their professions against individuals practicing these professions without acquiring the appropriate licenses. If I practiced these professions, I would acquire licenses. (I have held a Class A residential contractor’s license in Virgini for more than a decade; I don’t object to licensure.) I would simply ask brokers and foresters with such an interest to distinguish between research and analysis appropriate for a consultant to provide to a client and “practicing” real estate or forestry which is not.
I also suggest that any broker or agent who had been representing my client in this matter would have been outraged by the actions of the seller’s broker.
I’m sure the seller’s broker had “his” reasons for blowing you off – and I agree that the seller was probably in the dark and not optimally represented.
I had a similar broker who failed to present an offer to the seller which I had made in writing (FAX) and reinforced multiple times verbally by telephone. When I showed up at the broker’s office in person “these darn fax machines, you know….” yeah, I know. I had approached the seller’s broker directly and she only started calling the seller when I stood up to go bring a buyer’s agent into the transaction, which would have lost her half the commission. I had read the seller correctly (land had been on the market for 3+ years with no offers, purchased 20 years earlier and retained as part of a divorce settlement), and we negotiated an agreeable price at 75% of (the selling broker’s recommended) asking price.
In my case the selling broker felt she “controlled” the price of land in her county and that nothing sold for less than she thought it was worth. She also happened to retire about a year later, I hope my little episode with her contributed to her decision in some small way.
To Mr. Plaugher’s comment.
Mr. Plaugher is, indeed, an experienced professional working in the West Virginia forest products industry. He and I have corresponded from time to time. He’s currently working with land sales for MeadWestvaco. I bought a small parcel of MeadWestvaco land in the past, but have never sold my timber to the company. I don’t recall them bidding on any of my sales, but I don’t have a specific recollection one way or the other. Over the years, I have looked at a number of MeadWestvaco timber inventories of their own properties, ranging from small acreages to 100,000 acres. I’ve always involved consulting foresters in these evaluations.
Again, I am pleased to learn that MeadWestvaco counts everything 12 and larger as saw timber. My experience with buyers in this area and my own other than MeadWestvaco is that if a buyer counts those smaller trees in, the bid price will be discounted. Or the bid will count in the smaller diameters and not value them at all. This is my experience; it’s not an opinion.
Depending on circumstances, most landowners are generally advantaged over time by not harvesting their HW 12s and 14s, particularly on relatively good sites such as the one that the property in question contained. Harvesting would release these trees and they would gain volume quickly as a result.
Things often look differently depending on which side of the desk you’re sitting on.
Again, the only way for a landowner with timber to sell (or in this case, a buyer who wanted to become such a landowner) is to hire a consulting forester to make the contacts with the set of local timber buyers to determine their needs, stumpage prices by species and what dimensions they’re currently taking as sawtimber.
To Mr. Rutherford’s comment.
I did not “represent” my client as a lawyer represents a client or as a broker represents a client in any transaction. I do not represent clients in purchases. I do not act in an agency relationship as a brokers and lawyers do.
I did not say to the broker that I was representing a client/buyer. I told him that I had been hired to help the client research the property for the purpose of the client getting an offer in front of the seller in time for the seller to consider both offers. I asked the broker for information about the property.
I told the broker that the client asked me to help him find a local lawyer. I told the broker that I was being paid by the buyer on an hourly basis and that I had no claim to his commission. I told the broker that I was a consultant, not a broker or agent. I told the broker that my client was traveling and wanted to know how much time he had to submit an offer. I told the broker that the client was working with a local lawyer who was preparing a contract that would be ready on Tuesday.
I was acting as a consultant, not as an agent of the client. There’s a difference.
To Mr. Fitzgerald:
You may be right about a different outcome had the buyer involved a broker on his side of the deal as well as a consultant. A broker on the client’s side would, I think, have checked the seller’s broker from pulling this stunt. There wasn’t time, and the client had no reason to suspect the seller’s broker of bad faith until Monday when the stone-walling began. At that point, I couldn’t get in touch with him. We finally linked up that evening, by which time the deal had been done.
Buyers can hire whomever they please to help with due diligence. Big land deals usually involve a bunch of individuals figuring out the various pieces; some are brokers, some are not. Brokers do what brokers do, and consultants do what they do. Which is different.
I am a Realtor in South Carolina, dealing primarily with agricultural land. I have also spent most of my life as a land investor in Florida and South Carolina. I enjoy reading the posts to Land think as a way to stay current on information and subjects that are floating around. I have read the original post from Mr. Seltzer as well as all of the replies. I would agree that it seems the Mr. Seltzer is practicing without a license. As a private investor it was not uncommon to be approached by consultants that claimed they could bring a buyer if they could receive a commission. In some if these cases I know that the consultant was charging a fee from his customer as well as seeking commission from the seller (usually with the stipulation that the seller not tell the buyer. I am not saying in any way that this was Mr. Seltzer’s intent. I am just saying that consultants are not licensed and there for are not held to a legal standard. I feel that this hurts everyone in the business of land sales.
The main point that I would like to make is, unless I missed something, Mr. Seltzer expresses to a broker the intent of his customer to make an offer. The customer never made a written offer. South Carolina law says that all written offers must be presented to the client. We are prevented from taking or presenting verbal offers. I know that verbal negotiation may be common practice but to hold to the legal letter of the law, it is illegal. I have at least two calls a week where a customer asks will the client take (pick a figure). I explain that all offers must be in writing. They tell me that they will gladly put it in writing and then you never hear from them again.
The other point is that the amount of the offer that the broker’s client accepted is unknown. Maybe it was a full price offer with no contingencies. If this was the case then who can blame the client for taking the offer and not waiting on another promised offer.
There seems to be a lot of discussion over a situation where all the facts are not known.
Just the humble opinion of a novice realtor and an older land investor.
Thanks for the opportunity to express my opinion.
I forgot to add that the title “what explains screwing the seller” seems to be in poor taste. You do not know that the seller was unhappy or misled in any way. The seller might have simply decided not to wait on another offer. I was involved in the sale of a large tract 3 weeks ago where this was the exact case. The seller accepted an offer that he liked before other offers could be submitted, in this case it was the first offer with other offers pending. Who is to say that the seller was misled or “screwed”?
Mr. Selzer,
As a Real Estate Broker and a Consultant Forester in the State of Georgia, I am somewhat troubled by several comments made regarding the (negotiation) of this parcel of land.
First, you challenge the seller’s forester about his “cruise” of the timber on the property. That is your right. However, I have found through many timber sales over the years, that my volumes on sales are quite different than “buyers’ ” cruises. Their opinion about the timber being sold is directly related to their ability to get an acceptable delivered price from the mills in their operating areas. They may get a special price due to accessability, timber type or volumes. I cannot, as a consultant, keep up with all of the mills and their immediate timber needs. Hence, I like to sell timber by sealed bid. Your evaluation that the timber was worth $30,000 is just that, YOUR OPINION. Not right, not wrong. And by the way, many times I disagree with the seller’s timber volumes on timber properties for sale!
Next, you talk about comps. You mention that the asking price was in the ballpark, and you and your client discussed an offer. Your client then talks to the broker Monday morning.Did your client tell the broker he was going to make an offer? That is not mentioned in your comments. Kind of important! How did you get a copy of the broker’s contract? No information about that. Then, a buyer biased contract was put together, Did it ever occur to you that the selling broker may not accept your contract? That’s part of his job, protect his seller.
You email the broker and indicate that the you are aware that another offer has been submitted. That is not what was mentioned in your text a few paragraph’s ago. Another offer was coming in, not already submitted. You state in the email that you want to submit an offer. Fine. Said broker should have discussed with his seller. There is no responsibility on the part of the broker to indicate how much time you have to submit an offer. You have as much time as it takes until the seller accepts an offer placed in front of him or her.Period!
I agree with Mr. Fitzgerald that it is upon the buyer or his representative to make sure the offer is in front of the broker. Then, he MUST present it to the seller.Did you ever submit an offer? No information about that! Since you had email contact, why not submit the offer by email?
Too much information is missing about this sale. Was the 1st offer a full price offer? You don’t know that. The fact that your client’s offer was coming in Tuesday may mean he missed this one. You also mention that your client was going to include 2 contingencies. That is not a clean deal! They may seem simple to you, but the seller may not want any problems. You also mention that your buyer would have paid asking price. Knowing that another offer was going to be in front of the seller, why did you not submit a “Full Price” offer?
This all brings me to my final point. Having a broker represent you will prevent many of these problems. I am not trying to defend this particular broker, as there are many bad apples in every profession. I just think that maybe, just maybe, your client came in too late for this one! I have grumbled many times and not made a dime from missing a sale! At least you got paid!
David A. Francis III Francis Properties- Watkinsville, GA
WOW !! That was an attention-getter. Been there, done that ! Makes a wise man, wiser. Oops, there goes one broker’s integrity.
This activity goes on quite often in all aress of the real estate market. We’ve all have had similiar experiences.