Is it better to sell mineral rights through a broker or an auction?
How do you find a reputable broker or auction house?
Can you write your own deed to transfer rights to the buyer if you will be selling directly to someone without a broker or auction house?
Advice I have received in the past…
If you want to truly maximize the value of your mineral rights, competition is the key. You want hundreds of buyers or more competing to pay you the highest price.
So you want to do your due diligence and reach out to any and all potential specialists that are in the business of selling mineral rights. One of the most important questions you need to ask is “what is your approach to getting as many eyes on my mineral rights as possible?” Tell me what your marketing plan entails and what can I expect in terms of an audience using that approach to getting me the best price for my mineral rights? What does the market look like at this point in time in respect to the geographical area and the number of acres of my interest?
You also need to know up front what the minimum price you would be willing to sell for. But keep that number to yourself, do not share it. That will give you a great reference point to use when the offers start to roll in. if you are not able to get that minimum amount, maybe it is not the time to sell.
Keep in mind that the price of oil & gas at the time of sale has a lot to do with the total value of those rights to a buyer. The higher the wellhead price for the commodity, the higher the total price you can get for your rights. Knowing what the current price is in relation to the average price over a period of years will let you know what type of market you are in- bull, bear or sideways. Of course you would like to sell in a bull market when price is high relative to historical averages.
IMO, the bottom line is to do your homework. Do not decide upon the approach you are going to take until you are able to analyze the information you have received from all marketing avenues you have interviewed. They make their money when the rights sell, The lower the price, the faster the sales commission is earned by them. That motivation is exactly the opposite what your motivation is. So be careful to what you agree to. I have noticed that a 5-10% flat commission rate for selling the rights is common.
There may even be an opportunity to discuss an incentive commission whereby the salesperson would be paid a graduated commission structure depending upon the price he is able to get. The base range of price would be compensated at the minimum commission% and the higher the price that they are able to get for you above the base price would be compensated at a higher % for those marginal dollars. Therefore, they would have a financial incentive to get you the best price. Might be worth having the conversation anyway.
Lastly, keep in mind that the value of your rights also have a lot to do with the geographical area of your interests and the quality of the wells in that area. As they say, you can put lipstick on a pig but at the end of the day it is still a pig…
Just one person’s opinion. It may only be worth every penny you paid for it ($0). Good luck with your sales effort…
Wow, Jim! Thank you for this information. I am learning that this process is complicated. I really like how you gave me ideas for questions to ask sellers.
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