Most mineral owners who are searching for mineral rights buyers are trying to get offers for their minerals.
Before you waste a lot of time searching for buyers, it helps to understand the different types of oil and gas mineral buyers.
Here the different types of buyers you will encounter:
Individual Buyers: Some mineral rights buyers are high net worth individuals. These mineral buyers are interested in purchasing mineral rights to diversify their investments. Most individual mineral buyers in are purchasing deals below $100,000.
Flippers: One huge problem in the mineral rights space is mineral rights flippers. Mineral rights flippers are not buyers and do not have any cash. A mineral flipper will attempt to put you under contract at basically any price. Once they put you under contract, they mark up the price by 25% to 100% and attempt to sell your mineral rights to a real buyer. If they are successful, the flipper just took cash that should have been paid to you. The tricky part with mineral flippers is that they will not tell you they are flipping. They will pretend to be a legitimate buyer.
Low Ballers: While technically a legitimate mineral rights buyer, low ballers are extremely common. These buyers will send you offers in the mail that are far below market value. These types of buyers will typically apply a lot of pressure to accept an offer and they will also try and make it easy to sell by sending you the deed up front. If you are getting a lot of pressure to accept the offer, it’s probably a low baller.
True End Buyers: A true end buyer will be a private company specializing in mineral rights acquisitions or a private equity backed company specializing in mineral rights acquisitions. These mineral rights buyers are purchasing to hold long term.
How do you know which type of mineral buyer you are talking to? Figuring that out is difficult to impossible if you are not extremely familiar with mineral rights transactions.
Why are there so many shady mineral rights buyers?
When selling mineral rights you need to be extremely cautious. In our estimation, about 90% of “mineral buyers” are flippers and low ballers. Just 10% of the market are actually legitimate buyers.
There are two primary reasons:
1. Lack of Price Transparency: One of the biggest problems when trying to figure out mineral rights value is the fact that sales data is not public information. The mineral rights market is unique. There is no public sales data available to tell you what other mineral rights are selling for. In addition, each property is unique so there is no reliable way to know the value of mineral rights. What this means is that flippers and low ballers know mineral owners don’t know the value of what they are selling.
2. Lack of Competition: Most mineral buyers do not actually have to compete. Mineral owners assume they can find a fair price on their own. They receive a few offers in the mail, reach out to a few mineral buyers online, then take the highest offer they found. These mineral owners don’t realize that talking to a handful of mineral rights buyers is not going to yield the best price. You want thousands of mineral buyers competing to pay you the best price.
When oil and gas royalty buyers know that the value is unclear and they don’t have any competition, this creates the perfect situation to take advantage of mineral owners.
Mineral buyers prey on mineral owners who can “do it themselves” and don’t think they need help selling mineral rights. These mineral owners sell far below market value and allow these shady mineral buyers to make a fortune.