We are delighted to have the great Adam Ferrari with us today who has been helping us to answer all of your mineral related questions. Adam is an expert in the field of buying and selling minerals and we are very happy that he accepted our invitation to give us some support on this subject. Today we are going to specifically focus on what red flags you should keep an eye out for when selling minerals beneath your property, so that you can ensure that you don’t make any mistakes. Once your due diligence is done, a valuation is reached and an offer is made, here is the details which you have to keep an eye out for when selling minerals.
If you receive an offer which is way below the valuation then this isn’t just an error that someone has made, this is someone looking to capitalize on a seller who doesn’t know their value. If you are selling to a reputable and large company then they will always have done their homework and brought you a reasonable offer, if you get lowballed like this then alarm bells should start ringing.
If you are selling to a reputable and well known business then they will pay for the exchange of your mineral deed via cashiers check, certified check or perhaps even a wire transfer. When payments are made like this for the signed deed, the funds will be in your account right away. If they pay via banker’s draft however it may take days or weeks before that is available. Before selling ensure that you are not getting paid in this way as it raises many potential issues.
Reading the Fine Print
You should always read the fine print for any deals like this and one ting in particular to look out for is the mineral acre v royalty acre, two very different deals. You may think that you are selling a non-participating royalty interest when in actual fact your are selling your minerals. If you are in any doubt get a lawyer to look over the agreement.
You should be given sufficient time to review your offer and consult with any advisors and experts. This is why an offer which has an expiration time is something which should be a cause for concern. Any pressure on time such as 24 hour offers or immediate acceptance should be refused on the grounds that you don’t have enough time to properly review, don’t be pressured into your decision.
A title search should always be carried out ahead of the finalization of the deal to ensure that you own the property in question and to look through the history of the ownership of the property. If you are asked to do this or if it not done then this should raise concerns ahead of the deal.
Keep an eye out for these red flags when you are selling minerals.