Pulse Results

LANDTHINK Pulse: Mineral Rights Conveyance Decisive Factor for Land Buyers

LANDTHINK Pulse: Mineral Rights Conveyance Decisive Factor for Land Buyers

September’s LANDTHINK Pulse revealed 63.8% of respondents would not purchase land without the mineral rights being transferred.

Minerals such as oil, natural gas, metals, and coal can prove to be a very profitable to a landowner if they can be developed. Most of the time, “surface” rights and “subsurface” or mineral rights of land, are not owned by the same person. It’s common for mineral rights to be retained by a previous owner or leased to an oil or gas company with the resources for development. Once mineral rights have been severed from surface rights, it makes the resale of the property tricky. Buyer’s involved should consult an attorney.

Last month, the September Pulse asked: Would you purchase land without the mineral rights being transferred? The overwhelming answer to our informal online survey was “NO”, given by 63.8% of those responding. Only 36.2% said “YES”, they would purchase land without the mineral rights being conveyed.

The results of the survey were not surprising. Mineral rights are hot topic, especially in the Western United States. In our fuel-based economy, minerals underneath the surface can be lucrative for landowners.

Here’s how the final results panned out:

LANDTHINK Pulse: Mineral Rights Conveyance Decisive Factor for Land Buyers

  • 63.8% answered NO, they would not purchase land without the mineral rights
  • 36.2% answered YES, they would purchase land without the mineral rights

Congratulations to Scott Shuman, winner of the $50 Amazon gift card after answering the September Pulse question! Scott is an Auction Specialist with Hall and Hall at their Eaton, Colorado, office location.

Thank you to everyone who participated and shared the Pulse with friends and connections in the land industry.

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  • As a land broker, I have come up against the mineral rights issue from time to time. I focus on the North Georgia area of the country and it is not ordinarily an issue. However, there have been some issues relating to “Royalty Interests” on some timber company properties that have changed hands in this area. Basically, If the new property owner attempts to mine for minerals of any kind and finds something, they must pay a fee to the holder of the royalty interest. If no exploration occurs on the property, the owner doesn’t have to pay anyone. At times, a little tricky to explain to a potential buyer.

  • Selling off subsurface rights is a shortsighted tactic by owners of nice tracts, especially farm land. They are usually underpaid for the rights and with those rights also come the right to enter and exploit the subsurface rights, which can subsequently interfere with use and enjoyment of the surface right. It is similar to chopping up a tract to sell off road frontage rights, leaving a large parcel landlocked. Just shortsighted and diminishes the value of the holding.

  • Chip,
    I agree that most owners are underpaid for their minerals sales, which is mostly due to accepting a blind offer from someone without exploring the market. This is a common problem anytime someone sells and asset that they know very little about and fail to hire professional services to help them.
    It is very common for oil & gas minerals to be worth 2 to 10 times what the surface is in certain “active” areas.
    It is also very common for oil & gas minerals to have a zero value in areas where hydrocarbons do not exist.
    The sale of severed minerals has often allowed farmers to keep their land, pay off all their debt and continue farming with very little risk.
    You will find statutes in many states where oil & gas production trumps surface rights thereby allowing operators to enter and drill. This aspect is not usually something the previous owner accomplished, but merely state law.
    Best advice is to fully educate the buyers and sellers so they know exactly what they are getting and what the ramification are.

  • A few years ago I was interested in the beautiful state of West Virginia. When I experienced major problems with almost everyone wanting to retain underground rights (which I’d never heard of before), we abandoned W VA. I am currently looking at land in N. Georgia. I found a tract I was interested in but soon realized underground rights would be retained. This property dropped off my radar instantly. I have no interest in mining anything. However, I also have no interest in someone coming unto my land at their will and invading my privacy. For me, it is about the privacy not future profits. This issue is a deal breaker for me.

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