Market Value for Mineral Rights
Understanding the market value for mineral rights is a lot more complex than it may seem. Many mineral owners are looking for “comps,” or “comparable sales” to tell them what their mineral rights might be worth. The problem is that comps don’t exist with mineral rights.
Every property is unique. The value of your mineral rights could be worth 10x more than your neighbors. Your mineral rights might also be worth 10x less than your neighbors.
If you are looking for a website that will tell you the market value for mineral rights you won’t find it! If you have an offer to sell mineral rights and you want to know if it’s fair, this article will give you a better understanding of market value.
Understanding Market Value
The market value for mineral rights is complex. There are many different factors that play a role. Every buyer evaluates your mineral rights differently. If you have received offers to sell royalties, you have probably seen a large difference between the offers.
This makes the process of figuring out the true market value difficult for mineral owners. There is no Zillow or Redfin for mineral rights. There is no mineral rights appraisal service that can give you an accurate market value.
A lot of mineral owners fall into a common trap. They believe that their mineral rights may have more value in the future. We hear phrases all the time like, “When the price of oil goes up” or “When they drill a new well” or “Once they get that new pipeline in” and use this as justification for what their mineral rights might be worth in the future.
If you are selling a home, the market value is based upon what that home looks like today. You cannot sell your home above market value because it will be a lot better once renovations are done. You cannot sell your home above market value because the neighborhood will be much nicer in 10 years. Market value is all about the current value of your mineral rights.
Competition determines Market Value
If you are like most mineral owners, you have been receiving offers to sell mineral rights. A lot of mineral owners sell far below market value because they assume their highest offer is the best market price. Do not fall into this trap!
The only way to sell mineral rights for fair market value is competition. When mineral buyers are forced to compete they must pay market value. Many mineral owners gather up a few offers. These offers tend to vary a lot from the smallest to largest. Since the offers vary a lot, they see one number that looks way higher than the others.
If you see an offer for $2,750/acre and then another for $4,000/acre, the higher offer sounds way better! You must be getting fair market value right? Wrong!
Even though your highest offer may be way higher than your lowest offer, it does not mean your highest offer is fair market value.
Mineral owners do not realize how important competition is when it comes to selling mineral rights. When you sell mineral rights on your own, you nearly always sell far below market value. You may see $4,000/acre and feel you got a great deal, but you didn’t realize there was a mineral buyer who would have paid $5,800/acre.
The only way to ensure fair market value is to partner with US Mineral Exchange. We will get your property in front of thousands of mineral buyers. These mineral buyers will compete to pay you the highest market price. Already have an offer? If we don’t find you a higher offer we don’t make a dime!
Factors Affecting Market Value
Trying to determine what mineral rights might be worth is difficult. The reason is that there are many factors that affect market value. Any one of these factors may swing the value 5% to 50%+.
Each mineral buyer will look at these factors. One mineral buyer may assume a long term price of oil at $50/barrel and another assumes a long term price of oil at $60/barrel. This single assumption would create a 20% difference in the offers!
The reason it’s nearly impossible to estimate mineral rights value is because of the factors listed below:
Natural Gas Prices
Decline Curve Analysis
Current Cash Flow
Future Estimated Cash Flow
Nearby Permitting Activity
Nearby Rig Activity
Operator of the Wells
Mineral Buyers in the Area
Local Regulations and Rules
Pipeline capacity in the area
Mixture of Gas and Oil
Recompletion & Workover Potential
Number of Additional Wells Possible
All of these factors can change the value of mineral rights by a significant amount. This makes it impossible to accurately estimate the market value of mineral rights. A lot of mineral owners waste time trying to find an answer that simply doesn’t exist.
Deadly Market Value Mistakes
Over the years we have seen mineral owners make a lot mistakes that end up costing them thousands of dollars. Figuring out the market value of mineral rights on your own is nearly impossible. A lot of mineral owners do their own research and think they have it figured out. In doing so, they sell far below market value and lose thousands.
If you want to sell mineral rights for the highest price possible, avoid these deadly market value mistakes:
Local Rumors: When you base the value of your property on local rumors you are setting yourself up for disappointment. The rumors that circulate locally are almost always referring to the most expensive and best property sold in the entire county. When a mineral owner is convinced their property is worth what everyone around them tells them they will likely never sell their mineral rights. Local rumors and what the market is actually willing to pay are two different things.
Outdated Information: Another common trap mineral owners fall into is believing their property is worth a certain amount because that’s what they were offered a few years ago. The true market for mineral rights changes extremely rapidly. When the price of oil changes, the value of mineral rights can change dramatically as well. If you are basing the value of your property on what you were offered even a few months ago the value has likely changed.
Neighbors Property: When you value mineral rights based on what your neighbors property is worth, you can count on getting something entirely different. While it’s true that your surrounding neighbors property should be valued approximately the same, there are still other factors. There factors include the timing, who is making the offer, your ability to negotiate, number of acres owned, whether you are leased, lease agreement terms, and many more. If you are leased at 12.5% and your neighbor is leased at 20% their property is worth a significant amount more than yours.
Online Forums: Another unreliable source of information about the value of your property is forums. Mineral rights forums are filled with information that’s extremely unreliable. These forums tend to be filled with a lot of opinion and very little fact. A lot of the information being discussed is out of date, coming from a 3rd party, and coming from people who talk about mineral rights in forums and don’t actually participate in the market. Keep in mind that forums are a great place to learn more about your mineral rights. It’s simply important to understand that gauging the value of your property from these discussions will lead you down the wrong path.
Teaser Offers: A lot of mineral buyers will send out teaser offers. The mineral buyer may have no intention of paying that price, but they want you to pick up the phone and make contact. Once they get you on the phone they will convince you to take a much lower price (based on the factors we listed up above). The worst part about teaser offers is they lead you to believe your mineral rights are worth more than they really are.
Negotiated Offer: This might be the mistake the costs mineral owners the most money. A lot of mineral owners get a handful of offers. They will pick out the highest offer and then negotiate that offer even higher. When you compare your lowest offer to the one you negotiated a bit higher, you convince yourself that you got a great deal. In reality, 95% of the time you are selling far below market value. Why? There were only a handful of mineral buyers competing. Even though you got the best price among those handful of buyers, you did not get fair market value.
Satisfactory Offer: A lot of mineral owners will convince themselves they are happy with the mineral rights offer in hand. They will compare just a few offers and take the highest number. We ask them why they took that offer and they reply, “I was really happy with that number”. You may be happy accepting an offer of $100,000 because $100,000 is a lot of money, but what if you could have made $125,000 or even $150,000. Just because you are happy with the offer does not mean it is the best market price for selling mineral rights.
Discovering and Maximizing Market Value
If there is no way to accurately estimate market value, how do you determine what mineral rights are worth? Your mineral rights are worth what a mineral buyer is willing to pay today in a competitive bidding situation.
The only way to determine the fair market value of mineral rights is to sell them in an open market. When you sell them in an open market, you get competitive bids. Each bid is another piece of information that helps you determine the market value of mineral rights. Once you have gathered bids from legitimate mineral buyers, you then know what the current fair market value is for selling mineral rights.
There are literally thousands of mineral rights buyers out there. A large number of mineral owners talk to a small handful of buyers. They then accept an offer far below market value. The mineral buyer heads to the bank with a huge smile on their face. They just made a huge profit at your expense because they bought mineral rights with little to no competition.
By listing at US Mineral Exchange, you can discover the best market price for mineral rights. Our company gets your property in front of our huge network of qualified mineral rights buyers. These buyers will help you determine the true market value for your property. Interested buyers will submit bids for your property and help form a picture of what the market is truly willing to pay today for your property.
We encourage you to learn more about US Mineral Exchange and then list your mineral interest for sale. There’s no cost to list and we lay out exactly what to expect after listing. It’s a risk free way to see what the true market value for mineral rights is.
Contact US Mineral Exchange:
If you have questions about the market value for mineral rights, we’re here to help! We speak with mineral owners every day and we look forward to hearing from you.
Please don’t hesitate to fill out the form below with any questions and our friendly team will respond quickly.
The more information you can provide about your property the better! We can give you a better idea about the value of selling mineral rights if you provide more information. The most important thing we need is for you to answer the questions and provide your state and county.
If you have the required documents to list, providing those is extremely helpful!
Absolutely not! When you inquire at US Mineral Exchange we will not be putting any pressure on you to sell. We will help answer any questions you have whether you are interested in selling or not.
At US Mineral Exchange, we take privacy very seriously. We will NEVER sell your information or use it without your consent. When you send us documentation or tell us about your property, that information does not go outside our company without your consent. Even when you list a property for sale on our website, we strictly control who has access to the information about your listing so that only legitimate buyers will be able to see property details.
Many mineral owners make the mistake of getting an offer and quickly selling. They then accept an offer far below market value because they felt pressure to sell. There is nearly always a better price available.
Imagine you were selling a home. Would you get the best price from a random person who walks up and makes you an offer? No way! Now imagine you list the home on the MLS where thousands of potential buyers know your house is for sale. The key to getting the best price is competition. Our guide to selling mineral rights explains everything.
The reason that so many mineral owners decide to sell mineral rights at US Mineral Exchange is access to our large network of mineral rights buyers. Our goal is to help you get top dollar for selling mineral rights by getting your property in front of a huge audience of buyers. This allows buyers to compete against one another which ensures you get fair market value for selling mineral rights.
There are absolutely no cost to list your property. When you locate a buyer by listing your property with us, we are paid a commission directly by the buyers closing agent. This means you never have any out of pocket expenses ever. We only get paid if we can get you a better price than the current offer you have in hand.
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