A friend has received an unsolicited offer for his mineral interests that he is wanting to sell. The offer came with what looks like a check attached that is actually a "conditional draft." The letter says he can accept the offer by either (1) signing and returning the conveyance, or (2) tendering the conditional draft and signed conveyance at his bank.
Is this legit? My business gets checks all the time that are really just come-ons for loans and I know those are bogus. But what about this one for purchasing mineral interests? He has received similar documents from other companies in the past and ignored them, but it now at a point where he wants to sell.
If this is a legitimate transaction, are there compelling reasons to choose one of the methods of acceptance over the other? Both are conditioned on the offeror verifying ownership.
Absent a copy of the offer letter and other instruments being provided for our review, it is difficult for us to offer an opinion on the legitimacy of this particular scenario. However, what I can say is that unsolicited purchase offers are usually quite low compared to what the minerals are actually worth, and it may benefit your friend to get competing offers. Are these minerals in Texas? If so, if you want to send me a private message with his property description I can let you know what I've seen minerals sell for in his area, as well as forward it around to other mineral buyers for competing offers.
I agree with Wolfcamp about unsolicited offers. Many companies mail out hundreds of those types of letters at a time and they are frequently very low offers compared to what your friend might receive from a more direct buyer.
I can also put you / your friend in touch with buyers if you would like. And it doesn't matter where the mineral interests are.
I am sending you an invitation to become A Friend on The Forum if you would like to send me the information privately.
Putting aside whether the offer is low or high, are offers with conditional drafts attached in and of themselves bogus? Regardless of any other offers, I'm trying to figure out if there's something fishy with this particular type of transaction. My friend has gotten similar ones from other companies in the past, which makes me think these conditional drafts might be a typical way to do these transactions, but I have no way of knowing, which is why I'm asking the question here.
And if this is how things are done, is there a compelling reason to choose one method of accomplishing the conveyance over another, i.e., is it "better" to accept the offer by depositing the conditional draft, or to just send the executed conveyance to the offeror?
I would never send an executed document without payment in hand, so I would suggest you go the Bank route.
Drafts are not unusual and they all have wording to the effect of "upon approval of title".
If the Draft is for any more than 30 Days or ff they have added wording to the "conditions" to the effect of "approval of purchase" or something like that, then they are probably trying to "flip" the interests for a profit. If they can't find a Buyer for them, they may cancel the purchase.
The "Days" of the Draft is intended to give them time to send a Landman to the Courthouse to check title on the interests. And they won't do that until they have something in writing. It's too expensive to do so for uncommitted interests.
And running the Draft and the Mineral Deed through your Bank's Collections Department is perfectly normal. Industry Standard, in fact.
Your Bank's Collections Department will hold the Mineral Deed while it submits Notice of the Draft to the Buyer's Bank for payment (collection). The "Days" of the Draft begin when the Buyer's Bank receives Notice of the Draft. When your Bank receives your money, they send the Buyer the Mineral Deed.
Your Bank will charge you a fee for processing the Draft - up to $100. You can request that the Buyer pay it.
The conditional drafts are often used by mineral buyers to put something in front of mineral owners that looks like a check, to visualize what their minerals might sell for. It is a psychological tool for trying to convince them to sell. Payment is as it implies, conditional.
A properly structured mineral transaction should consist of a purchase agreement signed by the buyer and seller, and a mutually acceptable mineral deed. I personally would not sign something someone sends me in the mail that is unsolicited.
And I neglected to mention this before, but look and see if their proposed Deed contains wording to the effect of your friend conveying anything he owns in the County. That might include properties your friend did not intend on selling, including surface rights.
Some of these letter senders are not the most honest people in the world.
Thanks for the answers about what's standard practice. Sounds like he can consider this to be a legitimate offer. And thanks for the warning about bank fees for the conditional draft--good to know.
It is a county-wide conveyance. He would obviously prefer not to do that because you just never know what will pop up, but it's not a deal-breaker to him.
Yes, that's them. He gets checks for two properties that are the same on his tax bill except one is TR 24 and one is TR 25. Each of them says: SUR ACRES 3300
"TR 24" & "TR 25" indicates Unit Tracts 24 and 25 to me.
If that is true, then in order to determine his net mineral acres you would need a copy of the Unit Agreement. And you will need a copy of the Lease(s) his interest is subject to so you can adjust the decimal interests up to include the entire gross net mineral acreage (for example, if his interest is subject to a 1/4 royalty lease, then his gross interest in the Unit would be 4 times what his check presently reflects).
But that still might not be an accurate estimate of his entire mineral ownership. All of his land or interests might not be included in the Unit.
Most Units are at most 704 acres (640 acres + 10%). If the 3300 acres is the lands his interest is in, then once you determine what his interest in TR 25 & TR 25 is, then you would need to apply that decimal or percentage ownership to the entire 3300 acres.
How did he acquire the interests? Does he have a copy of his Acquisition Deed?
Well, I have bad news. I had been relying on the permit/drilling data that was provided in the previous post you just linked to that referenced the JPM EOC well, but upon my own research it looks like the person that provided that information was referencing an incorrect township. They were referencing T1N and not T2N. There does not appear to be a permit for a horizontal well in Section 32, Block 32, T2N.
With that cleared up, some of the instruments that would be worth reviewing before proceeding with a sale are the oil and gas lease covering the property, the source document that purports to convey to your friend his mineral interests, as well as a copy of the unit agreement that covers his tract. Once you have that information, you can make a more informed decision on what a good asking price should be. Also, the blanket conveyance of all interests in the county is not a good idea... I pulled the paydeck for the wells in that unit, and I see RidgerockTX owns identical interests to those of your friend. Are they the ones that are trying to purchase the minerals?