Ready To Sell Mineral Royalties For The First Time? 3 Things To Keep In Mind To Ensure Fair Prices

15 December 2016
 Categories: Real Estate, Blog


If you have some mineral royalties that you need to sell, here are three tips that you should keep in mind to ensure that you get a fair price for the royalties that you want to get rid of.

#1 Avoid Bad Buyers

There are many people out there who will try to purchase your royalties from you by offering you unfair bids that will deprive you of the market value of your mineral royalties. These types of sellers usually employ a few different tricks that you should be aware of.

To start with, many bad buyers will try to give you a really short time period to make a decision to sell your royalties. They may present what seems like a good offer and give you a short period of time to make a decision – such as twenty-four hours – before the offer expires. These offers are generally not as good as they seem and the short time frame is in effect to force you to make a poor judgement call.

Many bad buyers will also send you letters in the mail offering to purchase your mineral rights, often for cash. They will use a lot of buzz words in their letters while offering you a value that is below fair market rates.

Finally, other bad buyers try to drag out the sale. If you have a buyer that keep dragging out the closing, it may be because they don't actually have the money to buy your rights at the rate that they promised you.

Try to avoid buyers that employ the three scams described above.

#2 Know The Tax Consequences

Before you sell your mineral rights, make sure that you realize that selling royalties can incur tax penalties. You may incur both federal and state tax penalties for selling your mining royalties. Be sure to speak to your tax accountant to figure out the best way to sell your royalties so that you don't incur too many tax penalties all at once.

#3 Know The Value

Finally, you want to make sure that you understand the value of your royalties. Do some research and find out how many years your royalties are likely to net actually production of minerals and the value of those years of production. You are not selling shares; you are selling royalties that have long-term pay-off potential, so make sure that you are being paid for the long-term potential of your royalties, not just their short-term worth. 

To learn more, contact a company like Appalachian Mineral Partners.