Its kinda gamble for them huh? People find out about the unknown mineral rights then they dont want to sell unless they need money quickly
I’m surprised there wasn’t a clause in your PSA that negated your ability to withdraw from the sale based on this. When mineral companies enter into these contracts it usually states you will be paid $x per mineral acre and you agree to sell at that price. Just because you don’t like their findings doesn’t change that you committed to selling. Just like buying a house, once you enter a contract, you can’t just withdraw “because”…
People back out of all kinds of agreements and even at the last minute, whether it is buying or selling homes, many types of transactions,
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From my experience, there is never a clause, this is just how they do it and they have to spend money to research, so they wouldn’t add a clause like that. I realize I did commit by signing but it was also not a good decision to sell, and a very hard one at that. We all have to do what we have to do. There was not a complete commitment until all signatures were signed after the findings in the agreement. It was not something I enjoyed doing. You can judge me all you want, but I did what I had to do.
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I will also add that when I picked out the condo, I could no longer buy it once we found out the amount I was to receive from the NMA’s was half of what we thought it was. Not only was that disappointing, but it also affected everyone, including the realtor. They had also spent time with all the paperwork for this not to go through.
James, Im not sure what you mean, “by no performance requirements or related penalties”? So, you run full section title before making phone calls to purchase minerals and the offer you make is the final offer for the net acres with no due dilligence time required? One of the best mineral buyers/companies Ive ever met always did 30 day closings as soon as they got the LOI signed and usually would close within 15 days, but if it was real busy on the title side, theyd stretch the closing to 28-29 days. Their buyers would know the legals but not have the net acreage, as 75% of the owners know what they own. Guess Im confused as to why youre adament about signing a LOI with a 30 day closing period.
Not sure I said a 30 day LOI Bob. My point is that most of these LOI’s are loose and open ended. Granted, Sellers can negotiate better terms.
We have a focused acquisition program that allows us a better base title. We do have solid title prior to contact or we understand the outstanding title issues. Checking title to current date is fairly simple today in the areas where we acquire properties.. In certain cases, curative analysis can take some extra time, but we clearly disclose those issues at the offer point.
I see a lot of purchase proposals since we own 500 properties, in 85 counties covering 8 States. The conversations that I have with these Buyers borderlines on comical. A common conversation starts with they want to buy our mineral property in TX. My response is which one which generally is followed by a long and unknowing pause. Then there is the proposal that I supply them with title, revenue, and development information so they can present an offer. How can anyone take these people as credible?
As a Seller, I couldn’t care less if the Buyer is busy. All they are searching for is a response and then they will put together a possible offer. If I tell them to go to our website, they discover we are pros and there is never another contact from them. What does that tell you about them? They are looking for low hanging fruit and dealing with the uninformed. One of the reasons I participate on this forum is to help people to become better informed so they can make better decisions.
With all this said, there are several good Buyers out there today that function professionally and transparently. I do not try to discourage owners from selling since I do not know there financial or estate planning purposes. I appreciate people such as yourself that provide information based upon your professional and business experience.
I apologize if my postings provided some confusion. I am passionate about this subject matter. I see the @SHeath problem as a common occurrence. There are issues on both sides for the situation.
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If you have that option in this specific example great and it’s worth checking out but just stating that is typically not going to be the case. And a year is a really long time in the mineral buying world, If it was me selling I would undoubtedly explore all my options. Run companies names on the online courthouse, see who’s actually filing deeds and closing deals.
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I enjoy reading all your posts. Ive invested in a mineral funds group and working interest group the last 15-20 years or so. And then I have my own minerals that I inherited and picked up some acreage here and there. My rule of thumb, the first OGL offer I get, I wait it out a month to see how many more offers I get, then I circle back with all of them, take the highest offer and ask for 25% more with a 30 day closing date and see what they say. Im old and dont like to wait until poolings for an offer, a lot can change with oil prices and offers between the 1st offer date and the pooling. When selling minerals, Ive sold plenty that I inherited or bought. I keep an excel sheet with everything that I own and input every offer I get. Whenever I see offfers that jump off the page, I send them to an engineer that Ive gotten to know over the years and he runs the numbers and lets me decide what to do with them. Sometimes I sell, sometimes I dont!
Most of these companies hire young kids out of college for cheap labor to do all the calling, if I know that I own more than 20 acres in the section, I always say I appreciate your call and might be interested if your boss could call me to cut out the level of confusion/back and forth.
Again, I enjoy reading your posts sir, keep em coming!
PSA’s are important, especially if a seller dies in the middle of a sale (it’s happened to me). Thankfully I’ve never come across a deal where the title examination revealed the person owned half as much mineral interest as they are being paid on, but I’m sure it does happen. As a buyer, that’s a big risk of not doing proper title work before closing. If I were investing in a deal, I don’t want the risk of the operator paying me far less royalties once they discover the error at some future point.
As an owner who has discovered they own less than they are being paid on, it may be worth considering notifying the operator and correcting the payments going forward. At least your asset will be marketable should you want to sell it in the future. Otherwise, plan to keep it in the family and make sure your beneficiaries are well aware of the situation.
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Great thoughts from you and @Bob77.
As to the OGL, companies will typically propose the OGL and issue a draft based upon title review. I do not conform to this practice in leasing our properties. I will issue or sign a commitment letter for a fixed time period (less than 20 days and that sets out the terms of the OGL and the form of the OGL. This allows me to maintain control and assert performance conditions as to payment and issuance of the OGL.
Good practice as to the sale of your mineral interest if you feel uncomfortable with the practice.
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Your complaints about the NMA on the sale were due to your own lack of knowledge as to how to calculate your ownership based on the records. It was not the fault of the purchaser who caught your error in claiming extra NMA ownership. How do you know that the attorney has definite knowledge as to the total value of the minerals? If she is charging a fee at sale closing, her incentive will be to make sure the sale is closed to get her fee.
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Would you explain what OGL is?
OGL is the acronym for Oil and Gas Lease.
You could make a deal to sell at a “Fixed Price” more or less. If it’s more acreage, then it’s to the buyer’s advantage. If less acreage, it’s to the sellers advantage. They want a way to back out but you are not supposed to have one they think.
Doubt many companies would agree to that language…Just put any discrepancy in acreage up/or down, price will be adjusted based off the average price per nra/nma agreed to in the contract. If you are that worried, add language that says if confirmed acreage is less/more than X% total price bid in PSA, seller has right to cancel contractual agreement.
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Never ever ever sign the buyers contracts they present. The overwhelming majority of them are one sided options giving the buyer the right to back out but binding you to sell. It is a real estate transaction and should be treated as such. A simple earnest money contract, giving them a certain amount of time to verify title, is what you should do. If you own less than they thought, you can either put in a formula to adjust the sales price or let them terminate and get their earnest money back.
Also, since title companies in Texas do not insure mineral titles, if it is a mineral only sale, it may have to be closed through an attorneys trust account (or some other escrow agent) rather than a title company.
Do not let your relatives stampede you into signing one of these deals direct with the buyers. Do not fall for their pressure tactics to move quickly, most of which were taken straight out of the used car dealer sales manual.
Most importantly, understand you are unlikely to receive fair value from most mineral buyers. They are in the business of trying to buy minerals where they think they can recoup their investment quickly and have some substantial upside. Research what the mineral investment sellers are advertising if you don’t believe me. They tout it is a safe investment with 12% returns (the very definition of too good to be true). Sadly, this often turns out true because so many sellers out their are uneducated on how the market works and sell at pennies on the dollar.
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There are a lot of business’s on Facebook and Google that are not as what they advertise. In fact it is getting worse ALL the TIME! Money Lenders, Mineral Buyers head the list! Ha Ha!