Engagement Letter

[Wny Hunter]

I'm in the process of signing an engagement letter with a forester but i am asking for assistance with the wording of it. I was wondering if anybody had input on the part where there is no cap on the maximum amount of hours I can be billed for if I reject all offers. I don't like that part. I feel like there should be some wording in there like " Not to exceed X amount of hours. ( I couldn't figure out how to black out the the name of the company , so i just made up a name ).

JOHN DOE MANAGEMENT SERVICES, INC.


___________________, 201_​

_________________________
_________________________
_________________________
_________________________
Re: Engagement As Your Forestry Consultant


Mr. & Mrs ____________:
Thank you for giving John Doe Management Services, Inc. (“JDMS”) the opportunity to assist you in managing and selling your timber located at _________________________________________.

JDMS, will act as your forestry consultant to mark, manage and sell your timber to the highest bidder. Once sold, JDMS will act as your agent in connection with the harvesting of the timber by the buyer. In marking and selling your timber, JDMS will strive to meet your management objectives for your forestland. You agree to pay JDMS a fee for our services of 7 % of the actual sale price of the timber sold.

You will have the right to reject any and all offers made for your timber. If you reject all of the offers, you agree to pay JDMS on an hourly basis for the work performed, at a rate of $35.00 per hour. In addition, if you sell a material portion of the marked timber within one year after rejecting the offers obtained by JDMS, you agree to pay JDMS 7 % of the actual sale price of the timber sold. In that case, JDMS will, however, credit you for any hourly fee previously paid.


Thank you again for the opportunity to act as your forestry consultant.
Please acknowledge your agreement to the above terms by signing this letter in the space provided below.
Very truly yours,

JOHN DOE MANAGEMENT SERVICES, INC.

By:______________________________
, Member

Agreed and accepted
on ____________, 20__.


________________________________
Landowner

 

[Buckly]

Just my opinions, he should know approx how long it will take to mark and inventory your timber and also the current market value. Every timber sale I’ve done they can give you a very good idea what it’s worth in the current market. If he can’t get at least that figure then he hasn’t done his job marketing. Everyone I worked with just had a flat fee for marking the trees. If it didn’t sell for what they thought it was worth they wouldn’t charge anything other than the flat fee for marking.

 

[Bill]

Good thinking. You need a stop loss. Get them to tell you the max they would charge and put it in there...

 

[Wny Hunter]

I did receive a estimate of current market value, which i am comfortable with. My concern is when we put it to bid , it comes back way under because of whatever reason ( China /U.S. trading situation, lack of interest due to size of parcel, sugar maple trees took a dump in value, etc). What if the company turns around and says, we put 100 man hours into your property, so now you owe us $3500. To be clear, I do feel very comfortable with this particular forester , that’s why I choose him over the other 3 foresters that came to my property. We spent 4 hours walking my property and discussing different ideas and focusing on what my goals were for the property. I guess my question is does anybody have an idea on what the average amount of hours is spent in marking 80 acres of land plus the other amount of time sending it out to bid , etc.

 

[yoderjac]

Around here it is more typical for them to charge a percentage of the sale price. That way all you need to do is specify what their duties are before the sale and during the harvest. Our guy charged 8%. That even covered our Forest Stewardship Plan.

 

[Buckly]

I did receive a estimate of current market value, which i am comfortable with. My concern is when we put it to bid , it comes back way under because of whatever reason ( China /U.S. trading situation, lack of interest due to size of parcel, sugar maple trees took a dump in value, etc). What if the company turns around and says, we put 100 man hours into your property, so now you owe us $3500. To be clear, I do feel very comfortable with this particular forester , that’s why I choose him over the other 3 foresters that came to my property. We spent 4 hours walking my property and discussing different ideas and focusing on what my goals were for the property. I guess my question is does anybody have an idea on what the average amount of hours is spent in marking 80 acres of land plus the other amount of time sending it out to bid , etc.

That was the point I was making. He should be able to give a good estimate how long it will take to mark and inventory the trees. Those hours will not change it is what it is. Ask him how long he thinks it will take him. I would. As far as time marketing and selling the timber in my opinion he shouldn’t be charging any hours. That’s what his commission is for. If he can’t produce results he shouldn’t get any rewards. He should be able to get you at least fair market value that your comfortable with. Just my opinion again but it just seems disingenuous to charge you hours for marketing. Either way, if your sellling 80 acres of timber that’s a good piece of change so any thing you pay him will be deductible against capital gains tax. Hours and commission.

 

[j-bird]

I think he is trying to cover his butt should you decide to decline all offers... He too is concerned that for some reason the market tanks and you decide to refuse all offers and he is still out there doing his thing trying to get it sold. He doesn't want to keep plugging away while your expectations are too high for some reason. I would discuss with him a "not to exceed" amount. In that case you both are protected....and you can extend if you so choose. He is trying to minimize his risk, he should understand you wanting to minimize yours as well.

 

[Buckly]

Timber markets are usually driven on long term cycles. It’s not like the stock market where it could be worth half tomorrow. What ever the fair market value is today will still be fair market value 6 months or a year from now. A lot of times the timber buyers won’t even get to cutting it for a year or sometimes 2 after they’ve already paid you

 

[Wny Hunter]

Thanx for all the responses, and I did end up speaking to the forester earlier today. I spoke with him about my concerns about the language in the contract about “hours of work performed”. He did say it should take him and another worker about 9 hours to inventory and mark the trees. We both agreed to put the max hours at no more then 20 hours should I reject all offers . Thanx again