10 Tips Every Mineral Owner Should Know

FSBO vs Mineral Rights Broker:   We put this tip at #1 for a reason.  The #1 tip for mineral owners is to work with a qualified mineral rights broker when selling mineral rights.  The primary reason is that when you sell mineral rights on your own you won’t reach enough buyers.   Each buyer evaluates your mineral rights differently.  The offers will be all over the board.  To get maximum value when selling mineral rights you need a competitive bidding environment.  This is the only way to sell for the highest price.  In addition, there are a lot of ways to get taken advantage of.  Mineral buyers know that mineral owners do not know what they are doing.  A qualified mineral rights broker will help guide you through the process.  Do not sell mineral rights on your own.  You’ll sell below market value and you run an extremely high risk of being taken advantage of.

Understand Market Value:   A lot of mineral owners sell mineral rights without understanding market value.  When you sell mineral rights, your mineral rights are worth what a mineral buyer will pay today for your mineral rights.   A lot of mineral owners talk about what will happen in the future.  What matters is what your mineral rights are worth today.  A mineral buyer does not pay based upon wells that could be drilled in the future.   The market value of mineral rights is determined by putting your mineral rights in a competitive bidding situation and then accepting the highest market value available.

Rushing to Accept an Offer:  This is another way that mineral owners lose out on a huge amount of money.   When you get an unsolicited offer to sell mineral rights, and then quickly accept that offer, you sold below market value 99% of the time.  Why?  Imagine putting you have no intention of selling your home.  A stranger walks up to your home and makes you an offer.  What are the odds that offer is the best price available?  Virtually zero.  Yet mineral owners fall into this trap all the time.  They get an offer or two in the mail, then quickly accept a below market offer because they rushed into it.  Buyers will put pressure on you to sell quickly.  Don’t fall into this trap.  Getting competitive bids is extremely important if you want a good price.

Mineral Buyers:  A lot of mineral owners do not understand mineral rights buyers.  They feel that mineral buyers will treat them fairly and honestly.  While there are a lot of fair and honest mineral buyers, there are 10x more mineral buyers who will screw you over every chance they can get.  This industry is dirty.  Mineral buyers understand that mineral owners have no idea what they are doing.  They will take advantage of you and make a huge amount of money in the process while they smile and assure you they are giving you a great deal.  You need an advocate on your side who is looking out for your best interests.

Flippers:  Did you know that most “mineral buyers” are actually just flippers?  What is a mineral rights flipper?  A mineral rights flipper is someone who pretends to be a buyer.  They make you an offer to sell, get you to sign a contract, and then turn around and sell the contract you signed at a higher price.  For example, you may agree to sell for $2,000/acre.  They may turn around and sell that contract to someone else for $3,000/acre.  That means they just made a 50% commission for flipping your mineral rights.   It’s virtually impossible to determine if you are working with a legitimate end buyer or a mineral rights flipper.    The example below illustrates how mineral rights are commonly sold.

Brokers:   Our #1 tip was to use a mineral rights broker when selling mineral rights.  How do you know which mineral rights broker to pick?  Obviously we are biased, but you should sell mineral rights at US Mineral Exchange.   Don’t just take our word for it.  Look around and check out your other options.  While you are evaluating your options, looking for these common red flags:

• The broker has no publicly available listings
• The broker provides no information to help you understand the process, the industry, etc.
• The broker provides services for multiple industries (coal, wind, solar, land, etc etc) and doesn’t focus exclusively on mineral rights
• The broker claims they can give you an accurate appraisal value of mineral rights (they can’t)
• The broker has only been in business for a short period of time

Determine whether you should sell: This seems obvious, but before you start the process of selling mineral rights you should consider whether you really want to sell.   There are a lot of reasons to sell mineral rights.   There are two big reasons to sell mineral rights.  The first is that you have no control over the asset.   When you own mineral rights you don’t get to decide when they drill.  All your eggs are in one basket.  If the operator drills one shallow well and leaves it held by production for a decade, you can’t force them to drill more and collect more royalty income.  The second reason to sell is due to taxes.  Collecting royalty income you are taxed at ordinary income tax rates.  When you sell, you pay capital gains tax rates based on your stepped up basis.  You might make more money by selling rather than collecting royalty income and paying more in taxes.

Avoid Common Mistakes:  Many mineral owners fall into the same traps.  We can help you avoid these common mineral owner mistakes when you sell mineral rights at US Mineral Exchange.  Our expert team will be with you each step of the way to help you avoid making the wrong decision.    We want to see mineral owners sell for the highest valuable possible.   A lot of mineral owners fall into common traps that can be avoided.

Documentation: If you want to sell mineral rights for maximum value documentation is key.  You need to be able to show mineral rights buyers proof of ownership.   Having your last 3 months of royalty check detail, lease agreement, order for payment, any recent division orders (last 3 months), and other documentation you have proving your ownership is extremely important.   Providing this information up front is what allows US Mineral Exchange to get you the highest value for your property.

Please see our required documents to list page for more information.

Closing Process:  At US Mineral Exchange we have a clearly defined process for selling mineral rights.  When you sell mineral rights on your own, the mineral buyer will have you send the mineral deed giving them ownership before you get the money.  This is obviously not a good situation for you.  At US Mineral Exchange, our process helps ensure you get paid at closing.