How to Sell Mineral Rights
If you want to sell mineral rights, you probably want to find out as much as you can about the process before you commit to a decision. A successful sale that earns you maximum profit with minimum effort depends on a confident seller familiar with the ins and outs of a complicated, time-sensitive market. Our mineral rights brokers at The Mineral Auction have developed a step-by-step guide to help you sell mineral rights at the best possible price. Once you understand the basic process, you will be better able to make an informed decision about how to proceed.
A summary of steps on how to sell your mineral rights:
- Find out if it is a good time to sell
- Learn about the legal requirements for selling
- Compile GIS Map Data
- Advertise your mineral rights to buyers
- Assess offers as they come in
- Draft a PSA
- Sign Buyer’s Deed
- Close the Deal and Get Paid
Though this process is extremely time-consuming and labor-intensive, it has successfully yielded fantastic selling prices for our clients. However, several of these steps demand a volume of work or a network of buyers that individual sellers simply cannot access. It is unfortunate that even the most knowledgeable seller will struggle to have multiple buyers see the property to generate competition and secure the highest possible price. In fact, there are several risks associated with the sales process of mineral rights that you can prepare for and avoid.
Common Risks to Avoid When Selling Mineral Rights
The high-stakes sale of mineral rights necessarily involves quite a few common pitfalls. Knowing what they are can help you avoid them as you move towards a successful closing. A few examples of common risks are:
- Waiting too long to sell: The value of your assets can decrease over time, and you need an extensive knowledge of market trends to make sure you sell your mineral rights at the right moment.
- Settling on the first offer: If you need money quickly then it can be tempting to take the very first offer you receive. This approach often results in an incredibly low price.
- Making mistakes judging the market because of stress or time constraints: Getting the best price depends on spending huge amounts of time on your sale. The intensity of the effort can result in anxiety and impatience.
- Failing to connect with enough buyers: When you cannot connect with enough buyers, you might not reach the best individual buyer. You are also missing out on the ability to generate competition to drive up the price of your asset.
- Falling prey to flippers: Sometimes experienced sellers will scout out properties, buy them below market value, and sell them for a higher price.
These problems have cost mineral rights owners a staggering amount of money. Time constraints, an untrustworthy buyer, or an advertising network that is slightly too small can decrease your profits immensely. For example, you might approach a credible buyer who asks for extensive GIS documentation. If you do not have that research on hand, you could miss a fantastic offer. Thankfully, many of these problems can be avoided if you sell mineral rights with an experienced broker.
Should I Hire a Broker to Sell My Mineral Rights?
Many mineral rights owners are skeptical of hiring a company to help with the sale of their property. Savvy, business-minded individuals are especially likely to question the necessity of working with brokers. However, we have seen firsthand the impact that hiring a broker can have on the final price. Clients who approach our team with offers in hand are stunned by the sharp improvements that happen once our team begins our regiment of advertising and research.
You should consider the many benefits of working with our brokers before or during the sale of your mineral rights. Some include:
- Gaining immediate access to a network of over 6,000 buyers: When we put your property before our expansive network, we generate competition that can drive up the price and exponentially increase the chance of reaching a buyer who will make an excellent offer.
- Saving time and effort: We take on a wide array of responsibilities including finding buyers, determining the market value of your rights, overseeing the relevant legal documents, and preparing research.
- Gaining specialized knowledge of the market: Our experience has prepared us to recognize great prices and easily identify trends.
- Obtaining extra legal help: We are equipped to assist with any legal procedures involved in the sale including writing contracts, signing contracts, and negotiating deeds.
- Knowing that our team will work hard for you: We match our fee to the price you get for your rights, so you know we will be motivated to get you the best possible outcome.
There are many things to consider when you decide to sell mineral rights. The steps involved require quite a bit of work, but the results can mean financial security for you and your family. Our mineral rights brokers at The Mineral Auction understand the importance of obtaining the highest price for your mineral rights. We are prepared to work diligently to sell your property for the most money possible to a trustworthy buyer. If you are interested in learning more about our services, feel free to contact us at (512) 698-2802.
8 Common Issues Owners Face When Trying to Sell Mineral Rights
Our clients commonly face the same issues when trying to sell their mineral rights. We have compiled a list of 8 of the most common issues they face and how to handle them.
- Buyer makes a fast offer – Companies who hit you with an extremely fast offer with demands of you accepting quickly is a HUGE red flag. “We can offer you $40,000 cash today!” Without doing much research into the area, these companies are trying to take your money and run as far as they can. Look into the company’s reputation, see if any of your neighbors have been contacted by the company, etc. You’ll thank yourself later that you did. We make sure to thoroughly research your rights to promote maximum value.
- What is the Difference between a mineral and royalty acre? – Mineral and royalty acres ARE DIFFERENT. Knowing the difference between the two can save you a LOT of money. Make sure to read the contract thoroughly and notice if they flip back and forth between mentioning mineral and royalty acres. You don’t want to see them change between the two as they can make it seem like they’re buying royalty acres when in reality they’re attempting to purchase your mineral interests without you even knowing! DO NOT be afraid to ask the purchasing company questions about the deal or even walk away entirely if anything feels fishy. You’ll be much better off waiting a little longer to find another company who is truthful in their agreements than going through with a deal where you can’t tell what exactly they are purchasing from you.
- Receiving a bank draft as a payment – A bank draft is NOT a payment. Rather, it is a promise to pay IF their obligations are met. However, by depositing it, it shows the “buyer” has given consideration towards a purchase and can sometimes bind you into a sale. We prefer to deal through an escrow account so that all terms are agreed to first, then payment is made. It makes it safer for both parties.
- Not doing your due diligence evaluating a deal – Evaluating a mineral purchase takes time.There are certainly buyers out there that have more money than brains and distribute money based on location and acreage size, but those companies are the exception, not the rule.Allowing multiple companies the proper time to evaluate your mineral rights mitigates the risk that you sell too soon – for a less than optimal price.
- Low Ball Offers – This one is self explanatory. It’s not uncommon to receive offers in the mail for 10% OF ACTUAL VALUE! DON’T BE A VICTIM!
- Not knowing exactly what you own – We see it all the time: Someone inherits mineral rights and, because they receive a large dollar amount offer, decides to take the offer. Had they known the going price per mineral acre(or royalty acre) in their particular area, they could’ve gotten twice as much money as they did. This can be solved by a brief title search…often costing around $500 or so.
- Not getting properly credited for unleased minerals – Another thing we frequently see is buyers not specifying what they’re paying for unleased acreage. If you’re in a hot area and leasing is imminent, it’s not only important that your sales price includes a market rate lease bonus, but also, assuming it’s being broken down on a net royalty acre basis, the offer needs to include the lease royalty in the calculation. Many times buyers will assume 1 unleased mineral acre to be priced at 1 net royalty acre. That should never be the case.
- Buyer’s “cherry picking” which acreage is under contract – The final sneaky maneuver we see buyers pull is getting all the acreage under contract (sometimes for extended periods) and then, when it is time to close, they retract their offer on all but the GOOD areas…or will close only on the permitted portion. In order to avoid wasting everyone’s time (and possibly money), this should be addressed in a purchase and sale agreement that is binding on both parties either through a performance or through an earnest money deposit.
Whether you choose to sell your minerals though The Mineral Auction or through another service, we hope these 8 tips will help you avoid some of the pitfalls that are all too common when it comes to selling mineral rights!