People often tell you to never sell mineral rights. Why is that advice so often given and is it right for you? There are many factors to consider when deciding if selling your mineral rights is the right choice for you. Some of the things to consider if you are thinking you should never sell mineral rights are:
- Could you use the money from the sale to meet other immediate needs?
- Would selling your mineral rights free up the hassle of taxes and estate burdens for your heirs?
- Will selling your mineral rights give you financial freedom to enjoy life now?
- Is leaving mineral rights to your children a legacy or a headache?
Is there ever a good time to Sell your Mineral Rights?
Many people wonder when the best time to sell your mineral rights is. With an ever changing oil and gas market, there is no “perfect time”. The good time to sell your mineral rights is the time that the money from the sale would serve your personal financial goals better than owning the mineral rights. If you decide the funds in your bank account would serve your life better than owning mineral rights, then it is a good time to sell. Mineral rights are an asset that works for you, not the other way around so make sure that you put the asset to work for you. If that means selling them so the money can work for you be sure to use a knowledgeable brokerage firm so you ensure you get the most value back in your pocket when you sell. We suggest US Mineral Exchange as they are a reputable company that has been in business for many years.
When to Sell your Mineral Rights
For every mineral owner the “when” on selling your mineral rights will be different. If you have an urgent financial need come up and you can liquidate the asset pay for that. If you are tired of dealing with the taxes and letters from mineral buyers in the mail or want to simplify your investments, it could be the right time. There are countless possibilities and yours will be uniquely different from anyone else. You get to decide when the time is right to sell or never sell mineral rights.
Should you Sell your Minerals Rights
Many people will tell you to “never sell mineral rights” because some day they will be worth millions of dollars. Some day does not pertain to paying bills today. If you are in a position where the money from a sale would be a positive in your life right now, then it may be time to sell. If you would rather continue to pay taxes and keep up with the required paperwork to maintain your mineral ownership, then you should stop reading now.
Your mineral rights ownership will fall into one of three categories: not leased, leased with no royalty income or producing royalty income.
Determining the value of your mineral rights in each of these situations is not an easy task. Many times, you can get an idea of value when you get offers from mineral buyers in the mail or on the phone. Many mineral buyers will look into an area they are interested in and see that you are a mineral owner. They will then reach out to you with what can be referred to as a “teaser letter”. These are letters that do not contain an actual offer but only suggest your minerals my be very valuable.
Mineral Buyers do this in order to get you to reach out to them and once you do they feel like they can convince you of the need to sell to them and that they are willing to pay you the best price. They will work to develop trust so you feel as if you need to be loyal to them when you sell. Be cautions when dealing with individual buyers as they do not have your best interests at heart, they are only looking to make a profit, and your minerals are the best way to do it. They do not want to pay you top dollar for your minerals, they want to “make a deal” at your expense.
On the flip side, if you have not gotten any offers in the mail, what is the best way to determine the value of your mineral rights?
Mineral Rights Value
In each of the three mineral ownership categories mentioned above there are some guidelines on how to get an idea of value. Mineral rights value is a very fluid notion. The old saying “It’s only worth what someone will pay for it” is very true in this scenario. With mineral rights many times the value is next to impossible to determine without getting offers from mineral buyers. Here is some guidance on determining mineral rights value based on what exactly you may own.
Not Leased and Not Producing Income
If you have a copy of a deed or have been told that someone left you mineral rights but you know nothing else it is likely the minerals are not leased and not producing any income. That means that they could have very little to no value. If you believe at some point there was income being received it would be worth checking with the state escheatment department to ensure you do not have any money due you.
Leased but not Producing Income
In this situation your mineral rights are leased and you have been paid a leasing bonus at that point of lease however no wells have been drilled yet, so the only income to date is the price per acre bonus you were paid at the point of leasing. Typically a guideline for value is 2 to 3 times the amount that was paid as a lease bonus is a range of what your mineral rights they may be worth in a sale. This range of value can fluctuate greatly with other factors taken into consideration. This is why working with a professional is so important. Mineral buyers tend to know so much more about value in an area than sellers. This makes getting multiple offers from multiple buyers so important.
If your minerals are producing royalty income, meaning, you are getting royalty checks in the mail monthly, the formula to get a range of value can be calculated by a factor of the income you are receiving. This is where you want to be careful when you decide to sell. There are so many additional factors that contribute to the value of your acreage it can be overwhelming figuring out how to value them. Using an experienced broker when sifting through all the offers can give you the confidence when you decide to sell mineral rights knowing you are getting the best pricing available. Our Royalty Calculator below will help give you an idea of potential value.
Once you Have Decided to Sell your Mineral Rights
As we mentioned above we recommend using an experienced broker to ensure that when you do decide to sell your mineral rights you get the most value from your sale. There are so many different details to be aware of when you sell to ensure you do get the most value and do not get taken advantage of it can be overwhelming. Working with a broker can give you peace of mind that your minerals brought as much value back to you as they possibly could. You get to walk away with the cash to put it to the best use in your life.
Please reach out using the form below, we would love to answer any further questions you may have.