I had to learn the hard way last year when considering selling a few NMA’s in Texas. The Gas/Oil companies who offered to buy and who I was considering, had me sign FIRST then they do the research (which they say is costly to them… I am sure it is used as tax right offs.). I didn’t worry about signing first as the clause was very thorough with this, but I do think it was my mistake, and when they came back I didn’t have the exact amount of shares and it was cut by half. So I didn’t sell (which I am happy I didn’t know after finding out about Jerry Jones and all the new drilling in our areas). I think they all do it that way, which to me is backwards.
Being a tax write-off is still a loss. The research is to verify that your title is clean and all the information is accurate. It is costly. No company wants to incur the expense of researching 100 people’s title and then make offers and have all of them refuse to sell. That is the road to bankruptcy.
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Thanks for explaining. I had in the past gotten letters from oil/gas companies explaining this can happen, and that if you sell , do it through the company leasing as they know EXACTLY what you have. So once again I am just stating what I have been told. I think I still have that letter.
Our SOP for mineral sales is we will only consider a letter of intent when there is an offer based upon title examination. Otherwise, there are just delays and changes since action incentives have been removed. We have also not sold a property in 35 years. When we buy properties, we operate within the SOP we expect of others.
I’ve seen all sides of this kind of transaction. The company that leases, or last leased, will have the best idea already of how much you actually own, having already done some or most of the necessary research. When you are selling the mineral rights, it is a different, deeper level of due diligence title research. For example, many companies will pay you for a lease as an heir of an unprobated estate, but you won’t be able to get royalties, depending on their rules and division order analyst requirements, until record title is cleared and it has been properly probated or their is a court order determining the heirship. On the other hand, mineral buyers may have different tolerance for how much curative they have an appetite to take on when they make you a deal.
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It’s always so many different opinions, very tough to figure it all out.
The buyer is responsible for doing due diligence and it can be very costly if there are a great number of owners involved.
Mineral owners are quite often wrong about their net mineral interest due to unclear deeds, errors in tax roles, and wrong information in wills. In your case, it appears that the buyer concluded that you have half of the interest that you thought you had. You should have asked to see their chain of title to justify that conclusion.
I recently was made aware of a property being drilled in Weld County Colorado that had mineral owners claiming ownership totaling more than 100%. It turned out that many owners “mineral rights” were the result of a fraud committed 90 years ago and their deeds were all invalid. Yet these deeds have been passed down to heirs who are all convinced that they own a legitimate interest.
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As previously stated, this is pretty standard. Once under contract then the full due diligence is done to confirm they are free and clear to buy the interest without taking on any issues or title failure. As far as selling to the company that leased you…that’s just typically not going to be an option…two separate sides of the business.
Not sure what you are trying to get at, other than letting us know the Dallas Cowboys owner is in your area? A mineral company’s title will be 10x better than an Oil and Gas Lease companys title 9 times out of 10. I have no idea what your question nor point is, Im guessing you are mad that the mineral company ran title on your interests, you own less than you thought and are mad that they did their job and you werent able to sell?
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No not at all. I was more mad at myself because I was learning all this, and should have realized there could be a change in NMA’s and payment due to their research. I had no idea that they did NOT do the research first. I then learned this through the process and at the time I signed I saw the clause but was not worried because I thought we knew what we had. I was trying to do this on my own and looking up our records, but did not have the correct information. I thought I was getting a certain amount of money, picked out a condo to buy, then had to cancel that as after they did the research it was half the amount. I later understood it is costly to them to do the research and why they do it this way. I wish it was not, as it would save a lot of frustration for both parties. So to conclude I did not sell the NMA’s and could not buy the condo. Some people on here just assume things and can be so negative.
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Any legit mineral buying company will require a due diligence period to examine title. Would you pay for a title search when buying a house and then submit your offer? No, because it doesn’t make any sense at all.
We received a letter last year from one of the companies that leased to us which stated to buy from them, as they know exactly the NMA’s we have, so not sure why this is stated in your message?