Have you been approached with an option to sell mineral rights? Normally when you sell mineral rights you spend some time locating a buyer at a reputable company like US Mineral Exchange. The buyer will then provide you with a PSA (purchase and sale agreement) and then completes the due diligence and subsequent sale. When you are given an option to sell mineral rights this should be a huge red flag!
An option to sell mineral rights is not selling mineral rights. An option to sell mineral rights is giving up control your property someone else. The person who holds the option now has the ability to negotiate for the sale of your property as if it were their property. When you sign an option to sell mineral rights, you are typically leaving thousands of dollars on the table.
How an option to sell mineral rights works
When you are approached to sell mineral rights, everything will seem normal at first. The individual/company offering to “purchase” your mineral rights will negotiate the price with you. One the price has been agreed upon, they will send you “the contract” for your signature. More often than not they won’t even tell you it’s an option contract they will simply tell you it’s the contract you need to sign to start the process.
Once you sign an option to sell mineral rights you have locked yourself into a specific price. The trick is that the “buyer” isn’t actually the buyer in most situations even though they acted like they were. Their goal is to get you to agree to a specific price (hopefully as low as possible) and then they will try and find someone to pay a higher price.
As an example, you may agree to sell your property for $2,500/acre. The “buyer” sends you an option agreement and you sign it. The “buyer” now has control of your property and they can go market it to a real mineral rights buyer. They may turn around and find someone willing to pay $5,000/acre for your property. They simply sign the contract over to the real buyer and pocket $2,500/acre (the same amount you got!). Doesn’t feel right does it? It’s not! That’s your money not theirs and you deserve to get the highest possible price.
When you sign an option to sell mineral rights there is a high probability to that someone is taking advantage of you. The mineral rights business is complicated. People familiar with the industry know this and they will take advantage of people. They do this by having you sign an option to sell mineral rights at a price far below market value and then finding someone to pay market value and making a huge profit.
Alternatives to an option to sell mineral rights
Before you sign an option to sell mineral rights you should carefully consider all options. We highly recommend that you do not sign the option agreement. Instead, you should find a true end buyer for your property by listing your property with a reputable company like US Mineral Exchange. A company with a solid reputation like US Mineral Exchange can help you locate true end buyers which puts more cash in your pocket.
We’ve seen many mineral owners make the mistake of signing an option to sell mineral rights. Don’t let that be you!
Questions about an option to sell mineral rights?
Have you received an option to sell mineral rights? If so, fill out the form below. We would be happy to discuss the option agreement you received and help you better understand what this offer represents. Don’t be fooled into signing an option to sell mineral rights and potentially leaving thousands of dollars on the table!