Common Mistakes when Selling Mineral Rights
Common Mistakes when Selling Mineral Rights
What are the most common mistakes when selling mineral rights? We’ve been working with mineral owners for years and we’re going to share the most common mistakes. As a mineral owner, it can be overwhelming trying to figure out the right thing to do. When you sell mineral rights you want to make sure you make the right decision. Avoid the common mistakes below and you’ll be much better off. You’ll probably have more cash in your pocket too!
Most Common Mistakes when Selling Mineral Rights
When you sell mineral rights in Texas, make sure you don’t fall into the traps below. You can maximize the value of your property when you sell by keeping the following in mind:
#1 Mistake – Accepting the 1st Offer
We could write an entire book about this common mistake. Mineral owners have lost out on thousands of dollars from making this mistake. Unfortunately this is also the most common mistake we see mineral owners make. What do we mean by accepting the first offer? This usually happens in 2 ways:
1. The Mineral owner will stumble across a website offering to purchase their mineral rights. They submit their information and receive an offer back. They assume they are getting a fair deal and decide to sell.
2. The mineral owner is approached either directly or with a letter in the mail offering to purchase mineral rights. They were not interested in selling their mineral rights but since the offer presented itself so easily they decide to sell.
The reason this is the number one mistake is that taking the 1st offer you receive leaves a lot of money on the table. Many mineral buyers would prefer you not shop around and see what other mineral buyers are offering. Why? So that you don’t find out they are not offering your full market value and they can purchase it for less money. As a mineral owner you want to maximize the value by getting your property in front of many mineral rights buyers. When you get multiple bids you create competition among buyers which increases the amount you receive.
To get multiple offers on your property, we recommend you list your property at US Mineral Exchange. They have a large network of mineral rights buyers who will compete to pay you the highest price. If you have an offer in hand, that shows there’s demand for your property and we recommend seeing what other buyers are willing to pay at US Mineral Exchange to make sure it’s a fair price.
Another one of the common mistakes when selling mineral rights is signing an option contract. Why? When you sign an option contract you have effectively given up control of your property. The person who holds the option contract is not obligated to buy your property. In fact, they usually have no intention of purchasing your property. When someone convinces you to sign an option contract they now have the ability to go sell your property someone else! If they get you to agree to sell for $1,000/acre and you sign an option contract, they can then go sell your property for thousands more per acre and pocket the difference. When you sign an option contract for the sale of mineral rights you are giving up control of your property and certainly receiving less than fair market value.
Listening to Rumors
If we had a $1 for every time a mineral owner was convinced their property was worth $10,000/acre because they heard someone else got that price we would be rich! One of the more common mistakes when selling mineral rights is assuming that your property is the same value as someone else’s property. The value of your property is completely independent of someone else’s.
Many mineral owners view mineral rights like a home. If you have 2 homes that are similar in size and close together, they are worth the same price. With mineral rights that’s not always the case. Your property may not be far from someone else’s but the value may be significantly more or less. The best way to ensure you get fair value for your property is by getting it in front of a lot of buyers and letting the market tell you how much it’s worth. Listing your property at US Mineral Exchange is the best way to accomplish this. You will quickly find out if your property is worth what the rumors are saying.
Timing – Like taking risks?
This is one of the hardest mistakes to stomach as a mineral owner. Unfortunately it happens all the time. We see a mineral owner get an offer for $5,000/acre and they stand to make some excellent money on the sale. Then they listen the rumors (we just talked about that one!) or believe their property is worth more so they decide to hold onto the property. Could you get more in the future? Possibly. Many times though a mineral owner holds onto the property and then the price of oil declines or a few bad wells are drilled in their area. The next thing they know they are accepting an offer for $2,500/acre just 6 months.
If you try and time the market in mineral rights is very easy to get burned. If you have taken the time to get multiple competing bids to ensure you are getting fair market value, holding out for more money may not be the best option available.
Questions about Selling Mineral Rights?
Do you have questions about your mineral rights? We are here to help. Fill out the form below and we’ll gladly take some time to help you through your situation.