Fair market value for mineral rights
Fair market value for mineral rights
Figuring out the fair market value for mineral rights seems like an impossible task. You can search for hours online and never get a straight answer. We are going to clear the air and tell you everything about the fair market value for mineral rights. Before you sell mineral rights below market value carefully read this post. We’ll help you avoid selling below fair market value for mineral rights.
Why can’t I find reliable information?
There are two main reason why you can’t find reliable information about the fair market value for mineral rights. Before you can begin talking about the fair market value for mineral rights it’s important to know why you can’t find good information.
Reason 1: Unreliable sources of information
When mineral owners start looking for the fair market value for mineral rights, they usually end up talking to a buyer or looking at forums. Trusting either of these sources for reliable information is a big mistake.
Mineral rights buyers will try and convince you that your property is worth less than what it really is. Why? They want to buy your mineral rights! Why would they tell you the real value when they want to purchase the property? Mineral rights buyers are motivated to pay you the lowest amount so they give you low ball value for your property. Don’t trust mineral rights buyers to give you accurate information about the fair market value of mineral rights.
Forums are another place where you will find extremely unreliable information. Forums will typically inflate prices and tell you the value is worth more than what it really is. Mineral owner forums are dominated by rumor. If a single owner gets an offer for $10,000/acre everyone believes their property is worth the same thing. Most information we have seen in mineral owner forums focuses on the highest possible price than any person has ever received. Even if the rumor is true and someone did get $10,000/acre they were an exception. Timing, location, buyer, and many more factors play a role. Don’t trust forums for accurate information about fair market value for mineral rights.
Reason 2: Public information vs Private information
When you sell a home, the sales price and parties involved are public information. You can easily look on websites like Zillow and see exactly how much a home sold for, the date, the buyer, seller, etc. Mineral rights do not work this way. When mineral rights are sold the information is not public. This means there is no official record that anyone can access.
Prices change rapidly based on oil prices, recent drilling success, timing, buyer funding, time of year, and a wide variety of other reasons. Even if there was a public record of all the mineral rights sales it wouldn’t matter. The prices vary significantly from one month to the next based on all these factors. We have seen properties that were worth $5,000/acre one month be worth less than $2,000/acre a few months later based on the factors above.
What this means is that there is no reliable information on the fair market value of mineral rights.
You can stop wasting hours online searching for the answer. Simply put, an accurate estimate of the fair market value of mineral rights cannot be made. There is no way to know for sure what the fair market value of mineral rights is until you put the property on the market and get offers.
How to sell mineral rights for fair market value
There are two way you can sell mineral rights. You can either:
- Sell mineral rights on your own
- Sell mineral rights with an industry professional
We see a lot of mineral owners make the mistake of going with option 1. They decide to sell mineral rights on their own. What they don’t realize is that you will almost never get the fair market value of mineral rights when you sell this way. Why? When you try and do it yourself you reach out to a few buyers (0r they contact you first). You talk with them and they assure you that you’re getting a good price. They end up purchasing your property below market value because they had no competition!
Buyers are smart. They know that most mineral owners who are selling mineral rights on their own won’t contact more than a handful of buyers. If you want to sell mineral rights for fair market value you absolutely must create competition for your property. The only way to do this is to get your property in front of thousands of buyers. Doing so forces these mineral rights buyers to compete for your property. In turn, this competition drives the price up and ensures that you get fair market value for mineral rights.
If you are thinking about selling mineral rights, we recommend you list your property at US Mineral Exchange. Doing so allows you to quickly get multiple competing offers. This is truly the only way to ensure you get fair market value for selling minerals. With no accurate way to gauge the fair market value of mineral rights, listing at US Mineral Exchange is your best bet. You will quickly find out how much your mineral rights are really worth in today’s market.
How to estimate the fair market value of mineral rights
We mentioned earlier that there is no way to accurately estimate the fair market value of mineral rights. However, it is possible to provide a very rough ball park number. This is a general rule of thumb and does not indicate what your property is worth. What we are providing below is a range of value. While most properties will fall in this range, many will not. Mineral rights fall into one of three stages of development. The stage your property is in will have a significant impact on value. The three stages are:
Non-Producing / Non-Leased —–> Leased —–> Producing
Determine the stage of development your property is in and then continue below to find out an estimated fair market value of mineral rights.
Market value of non-leased / non-producing mineral rights
Properties that are not currently leased and are not producing fall into this category. If you don’t receive a royalty check each month and you haven’t signed anything to lease your property in the last 5 years this is your property type. The fair market value of mineral rights in this category is anywhere from $0/acre to a few hundred per acre. There is very little demand for these properties and they take a long time to sell. The fact your property is not leased means it will takes years before royalties are produced, possibly decades.
Market value of leased mineral rights
The fair market value of mineral rights that are leased is around 2x to 3x the lease bonus amount. Keep in mind this is an estimate. It could be worth way more or way less! Mineral rights buyers will be interested in properties that are leased but not yet producing.
Market value of producing mineral rights
The market value of producing mineral rights is anywhere from 4 years to 6 years times the average amount you receive each month. You can quickly get an estimate of fair market value for mineral rights that are producing using the calculator below. Simply enter the average amount you receive each month in the first blank space. You will then get an estimate of the fair market value of mineral rights that are producing.
Questions about the fair market value of mineral rights?
If you have questions about the fair market value of mineral rights fill out the form below. At Texas Mineral Group we speak with mineral owners every day. While we can’t give you an exact fair market value of mineral rights, we can point you in the right direction. Don’t hesitate to get in touch with us!