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Should You Be Concerned About Selling Your Mineral Rights?

If you own land that has significant resources underneath, such as oil and gas, you may have been offered an opportunity to sell your rights to these so called minerals. Companies exist solely to extract these minerals, and they may offer you very lucrative deals. Most people decide to sell their mineral rights because it can yield the most profit. However, before you decide to take advantage of the incredible tax incentives that come with selling your mineral rights, it is important to understand a few things first. That way, you’ll be able to make the best decision moving forward.

Potential to Grow

It takes millions of years for oil and gas to develop, and your stockpile will not grow over time. What does change over time is the price of oil and gas, and you should take this into consideration. The first company that offers you a deal may be trying to get your rights on sale. Without proper knowledge and consultation from experts in mineral rights, you may not even realize that you aren’t getting a good deal. Instead of rushing into signing away your rights, you need to think about the current value and where the market is headed. Leasing is another option that landowners sometimes find appealing. Leasing companies will survey the land, and they often give a signing bonus at the start. However, this does not guarantee you more money as the hefty tax incentives change for land that is leased.

Next Generation

If you consider that the mineral rights might be worth less now and more later, it may be in your family’s best interest to hold onto the mineral rights for a while. Mineral rights are legally defined as property, and they can be passed down through a will or given away. That being said, many families pass their plans for the mineral rights down to the next generation only to have those rights and wishes sold to the first bidder. As the leader of your family, it may be best to sell the rights now so you can better manage the money.

Control of the Ground Surface

If you own the minerals under the land, then you also own the land above the minerals. Ground surface is a considerable aspect of leasing or selling your mineral rights. With the mineral rights in your hand, you can control what goes on at the surface, and you may be able to use the land for farming, raising livestock, or developing it into commercial real estate. Once you sell the mineral rights, these options go away. You still own the surface land, and the ownership of mineral rights does not affect this in anyway. However, the company that purchases those rights is allowed to drill and explore the land as they see fit. That means that your options may be limited until the oil and gas has been extracted, and then the land can return back to normal, the way you see fit. In the end, there is little to be concerned about when selling your mineral rights.

One Less Worry in the World: The Overlooked Advantage of Selling Mineral Rights

In deciding whether to sell or lease your mineral rights, you look at the pros and cons of either, and weigh what pros you desire to have and what cons you can tolerate.

In the case of selling, there is the advantage of getting an immediate sum that may be big enough to give you full financial flexibility. But it is not without disadvantages. Selling can result into bigger taxes, and there are instances where leasing can lead to bigger money, so there is the lost opportunity there. Also, according to the website of The Mineral Auction, you may encounter problems in the selling process, like being vulnerable to buyers who have below marker price offers.

In the case of leasing, there is the advantage of gaining control. This can be done through agreements and contracts with the company who is willing to lease your mineral rights. Also, as said earlier, there is a possibility that leasing can amount to more money when compared to outright selling, like when your property has been more productive than expected. The disadvantage, however, is that you are at risk of fluctuating market values that may decrease your royalties.

There is no better option, in the absolute sense. The better option will always depend on the mineral rights owner’s financial situation, reason for putting the rights available for the market, and preferences. But there is one advantage of selling that nobody talks about, even though it can arguably make or break an owner’s decision.

If you opt to sell your mineral rights, you are completely releasing yourself from the responsibility over the minerals. It is just like selling anything else. After selling, the thing doesn’t belong to you anymore, so it is one less worry in the world. The best part about that is that you even gained money from it – a huge sum at that.

You cannot say the same thing for leasing. In fact, leasing is the exact opposite. It gives you one more worry in the world. You have to think about the risks and how their rise may influence your financial situation. It is true that in some instances leasing can get you more money, but is it really worth the try, when it means that you have to constantly deal with the minerals? This is compared to the fact that, the alternative, selling mineral rights, completely disconnects you from the minerals. This may make selling a more attractive option.