Pros and Cons of Selling Your Mineral Rights

Posted by on Jan 19, 2014 in Auctions | 0 comments

Few people in the US are aware that real estate may have two components: surface land and mineral rights. The mineral rights refer to any sub-surface materials with commercial value that may exist below surface land.

Most landowners become aware of the rights they have over the minerals under their property only when they are approached with an offer to buy or lease the mineral rights. Those whose property has severed mineral rights may find out that another individual or entity has sold or rented out these rights to a development company when the bulldozers arrive. Not amusing, but perfectly legal.

Landowners with a fee simple deed or individuals who own the mineral rights to a parcel of land may legally sell these rights to a third party, much like selling any other real estate. There are portions of the US where the mineral rights are particularly sought after because there are proven deposits in the area, but there is potential for profit in any area in the US, so it would be a good idea for you to know more about the mineral rights you may have wherever your property is.

There are pros and cons of selling your mineral rights. The most obvious advantage is the money you can make and may need. Many developers buy mineral rights on speculation. This means that they are gambling on the fact that there may be valuable materials under certain property, usually based on probability reports culled from the presence of minerals in the area. Of course, there may be nothing but good old rock under your property, but no one really knows until they start digging.

The problem with selling your mineral rights outright is that it is a one-shot deal. If minerals do exist under your property, you have no interest in any additional profit that may be made outside the purchase price. If you sold the rights for a low price, you could be losing out on a ton of money. On the other hand, if you lease the rights for the royalties and nothing is found, you could miss the opportunity to sell the rights for more than it is worth. An article on The Mineral Auction advises professional assistance when considering selling your mineral rights so that you will get the best possible deal for them.

Selling your mineral rights outright also means that you will not have the headaches associated with the taxation, financial planning, and record-keeping of mineral production which you would have if you merely lease out the rights and get royalties. On the other hand, once you sell the rights you will lose control over when and where mining or extraction operations take place, which can be a bummer if you live on the property.

The factors affecting the decision of selling your minerals rights will vary on a case-to-case basis. The best thing you can do is to exercise caution when dealing with speculators and developers and to get professional advice from those who make it their business to know these things.

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