How to Sell Mineral Rights in Texas 3 Common Mistakes

So you want to know how to sell mineral rights in Texas?  You probably want a good price too right?  You’re in the right place!

If you are thinking about selling mineral rights in Texas you’re in the right place!  This free guide will tell you everything you need to know about how to sell mineral rights in Texas.   If you want to get the highest possible value for your mineral rights, carefully read all the information below.  In addition, we are going to show you how to avoid the 3 most common mistakes when selling mineral rights in Texas.  If you can avoid the common traps and sell mineral rights the right way you’ll pocket the highest amount possible.

How to Value Mineral Rights

Before you figure out how to sell mineral rights in Texas, you’re probably wondering about how to value your mineral rights.  Unlike the housing market and stock market where there is a lot of information available, there is very little information for mineral rights!   Your mineral rights could be worth anywhere from $50/acre to $5,000+/acre depending on where they are located.  There are a number factors that will affect the value of your mineral rights that all play a role in how much they are worth.

The best way to get an accurate assessment of the value is to get your property in front of a large audience of mineral buyers!  Imagine you were going to sell your home.   Would you want 1 or 2 buyers to come view the property and make an offer or do you want hundreds of people to stop by and check it out?  The more buyers that know your property is for sale, the more likely you are to get a fair market value.   The key to getting the highest value for your property is getting it in front of a large audience of buyers.  When buyers compete against each other, that means more cash in your pocket!

“The key to getting the highest value for your property is getting it in front of a large audience of buyers.”

How to Sell Mineral Rights in Texas

If you want to sell mineral rights or sell royalties, there are literally hundreds of options available.  A quick google search will show you countless ads from buyers wishing to purchase mineral rights.    Which one do you pick?  How do I know I’m getting a good deal?   It’s almost impossible to figure out where to turn!  Figuring out who to trust is half the battle when you want to know how to sell mineral rights in Texas.

Here are the types of buyers you will run into when you try to figure out how to sell mineral rights in Texas:

Letters in the Mail:  We speak with lots of mineral owners who received a letter in the mail to sell mineral rights in Texas.  They usually accompany an offer and a offer a quick close.   While you can sometimes find a good deal this way, these offers are usually below market value.   These buyers hope that you aren’t savvy enough to check out your other options!

Local Brokers:  There are a number of local mineral rights brokers who offer to help you sell mineral rights.  Unfortunately, these brokers are typically “flippers” who are trying to lock you into a low price and then sell it to someone else at a much higher price.   You can sometimes find a trust worthy broker who does want to help you out.  However, we would caution you that your local broker typically has a small network of buyers they know so the odds are you won’t find the best possible deal.

Real Estate Agents / Attorneys:  Many mineral owners make the mistake of enlisting their real estate agent or attorney to help them sell mineral rights.    The problem is that these experts know a lot about real estate and legal practices, but rarely know the best way to sell mineral rights.    The network of people these professional know is typically extremely limited.   If you want the highest possible value, we recommend against both of these options.

Individual Buyer Websites:  A quick google search for “Sell Mineral Rights in Texas” will yield hundreds of websites offering to purchase your mineral rights.  99.9% of the time these websites represent a single buyer.  While it’s possible you could find just the right buyer for your property visiting each website and asking for an offer, it would be extremely time consuming to do this.  In addition, you have no idea who you are working with when you check with individual websites.

Our Recommendation:   www.USMineralExchange.com

Why do we recommend US Mineral Exchange?  The reason we recommend their service is because they have thousands of buyers who frequent their website wishing to purchase mineral rights.   Instead of visiting a lot of websites and requesting an offer, you can create a single listing at US Mineral Exchange and then let all the buyers to come to you.    We recommend you sell mineral rights in Texas like this for the following reasons:

  • Quality Buyers:  You ensure you are working with quality buyers because everyone at US Mineral Exchange is pre-screened.
  • Time:   Many mineral owners waste hours trying to find the right buyer, submitting a bunch of information, then waiting for an offer.   When you list at US Mineral Exchange, you create a listing once and then let those buyers come to you.
  • Price:  The main reason we recommend US Mineral Exchange is because you ensure that you get the best possible price when all the buyers in the market know your property is available.  With thousands of buyers visiting their website, you can feel comfortable that you are getting your property out there in front of everyone.

3 Common Mineral Owner Mistakes that will cost you THOUSANDS of dollars

If you want to know how to sell mineral rights in Texas, you also need to know how to avoid the common mistakes mineral owners make.  Here is a list of the 5 most common mistakes we see mineral owners make:

Common Mistake #1:  Documentation

Many mineral owners make the mistake of not having any documentation put together.  If you want to sell mineral rights for the highest possible price, you should have the follow documentation ready:

Producing Properties:  If you currently receive royalty income each month, you should have the following documents ready to go:

  • Check Stubs: You should have the last 3 months of check stubs
  • Lease Agreement (optional):  If you have a lease agreement available, this is very helpful for buyers.

Leased but non-producing:  If you have an active lease agreement but you do not receive royalty income, you should pull together the following documents:

  • Lease agreement:  A full copy of your lease agreement including all pages.  Please note that this is not a lease addendum or memo for lease.  You need the original lease that shows all the terms (lease royalty rate, term of lease, etc).
  • Order for Payment: When you signed your lease, they should have provided you with an order for payment.  This document will tell you the price per acre (lease bonus) and the number of acres owned.

It’s impossible for a mineral buyer in Texas to evaluate your mineral rights without documentation.  Asking a mineral buyer to give you an offer without this documentation is like asking someone to make an offer on your home, but only providing them with the state where it’s located.

Common Mistake #2:  Not getting competing bids

The worst mistake you can make when selling mineral rights in Texas is not getting competing offers.   We have watched so many mineral owners sell far below market value.  This happens for two reasons:

  1.  Mineral owners are scared they are going to lose an offer.  Once you have an offer in hand, a mineral buyer may put pressure on you to accept or the offer will expire.  You may just put pressure on yourself to accept it and move on!  If you have an offer for $100,000, the odds you can’t find another offer for $100,000 is extremely low.   A large number of mineral owners fall into this trap.  They convince themselves that by not accepting the offer, they will be losing money, when the reality is the exactly the opposite.  You’ll make more money by getting competing offers with a reputable broker like US Mineral Exchange who can help you sell mineral rights for the best price.
  2.  Most mineral owners do not realize how differently mineral buyers evaluate properties.  A lot of mineral owners assume it’s like selling a home.  You may sell a home and get a bad deal, but it will probably be with 5% or 10% at worst of the market rate.  There is plenty of information to give you a good idea of what your home is worth.  Mineral rights are different.  The value of mineral rights depends entirely on what buyers think it’s worth.  Every mineral buyer in Texas will evaluate your property differently.   You may see offers of $40,000, $60,000, $65,000, and $90,000 on the same property!  Your goal is to find that buyer who is willing to pay the best price.  Most mineral owners get a few offers, accept an offer for $65,000, and never realize they could sell mineral rights for $90,000!

Common Mistake #3:  Not understanding contract terms

Mineral rights are complicated.  There are a lot of terms people are not familiar with.  It’s not your fault, it’s simply a confusing industry.   However, a lot of mineral owners try and navigate the process with no idea what they are doing.  In the end, they end up signing a contract that puts the mineral buyer in control.

Let’s look at an extremely common example.   You sign a contract that states you will be paid $5,000/net mineral acre assuming a 25% lease and 10 net mineral acres owned.   Based on the contract, you should be paid $50,000 at closing.  Simple enough.   A mineral buyer will run title and confirm your ownership.  When title comes back, they may be allowed to make adjustments based on what title shows.  Some mineral buyers will purposely make an offer based on information they know is false!  Why would they do that?

Using the example above, let’s say the mineral buyer knows you are leased at 12.5% and you only own 5 net mineral acres.   After they run title, you’ll learn the bad news.  Their offer is going to automatically adjust from $5,000/acre to $2,500/acre due to your lease being 12.5% instead of 25% (half as much).  In addition, it turns out that you only owned 5 net mineral acres instead of 10 net mineral acres.   What just happened to your offer?  You assumed you were going to be paid $50,000 at closing, but due to adjustments, you will only get $12,500 (5 net acres x $2,500/acre).   What in the world happened?!?!

If you don’t understand net mineral acres vs net royalty acres, lease royalty rates, unit sizes, decimal interests on check stubs, and how to properly structure a contract, you should not be selling mineral rights in Texas on your own.

This is yet another reason we recommend working with a reputable mineral rights broker.  A lot of mineral owners try and navigate the process themselves and end up getting taken advantage of.

Selling Mineral Rights in Texas during Coronavirus

The world has obviously changed a lot in just a few months time.  At the beginning of 2020, no one could have seen the impossible situation that oil and gas would be in just a few months later.   After Coronavirus hit, the demand for oil dropped substantially.  At the same time, the US was producing a massive supply of oil and OPEC was disagreeing about production cuts.  The caused oil to briefly trade negative.

What does all of this mean for mineral owners?  It depends on your situation.

If you want to sell mineral rights in Texas, pay close attention to your check stub to determine what type of product makes up the bulk of your check.  If your royalty income is mostly from oil, we recommend keeping a close eye on oil prices.  If oil remains below $40/barrel, it would probably be best to hold onto the mineral rights for the time being.  Mineral buyers in Texas are looking for a deal right now while prices are low.   Once oil heads above $40/barrel, it’s safe to sell mineral rights in Texas and realize a fair market price.

If your royalty checks are mostly from gas, we recommend selling as soon as possible.  Why?  Due to falling oil prices, many mineral buyers in Texas have money to spend but don’t want oil related properties.  Natural gas prices have remained relatively stable while oil has been falling.  This means that mineral buyers in Texas are very interested in gas mineral rights.

Questions about Selling Mineral Rights in Texas?

Before you sell mineral rights in Texas, fill out the free consultation form below.  We can help point you in the right direction.  We are happy to help answer any questions you have.  Whether you want to sell mineral rights in Texas or simply want to better understand your situation, fill out the contact form and we will quickly answer your questions!

Free Consultation – Sell Mineral Rights in Texas

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