The Pros and Cons of Selling Your Mineral Rights

The United States of America is the only country that allows for the ownership and selling of mineral rights by individuals. If an individual owns property and did not previously convey mineral rights to another person, they own the rights. This is an asset that many people choose to lease or sell in order to be financially awarded for a resource they otherwise of little use for. However, there are several factors to consider in choosing between leasing or selling mineral rights.

Leasing mineral rights involves an oil and gas company offering financial compensation upfront and providing royalties for the resources the land produces over the time of the contract. These payments can fluctuate over time depending on the production yield of the land.

The Pros of Leasing:

  • Retention of ownership of the rights
  • Bonus payments for signing a leasing contract
  • Continuous royalty payments

The Cons of Leasing:

  • Risky

There’s substantial risk involved in leasing mineral rights. The oil company controls when drilling occurs and there is no guarantee that the land will be fruitful in minerals. Oil and gas prices may also fluctuate and effect royalty payments.

Selling mineral rights is less risky than leasing mineral rights. The simpler process involves the oil and gas company evaluating the property and potential yield before making an offer.

The Pros of Selling:

  • Money on the spot
  • Less risk
  • Little paperwork

The Cons of Selling:

  • No more rights
  • No continued payments

Selling your mineral rights will give you a large lump of cash. There is no risk assumed to you as would be the case when leasing mineral rights. If the land does not produce as the oil and gas company hoped, the repercussions are not the seller’s responsibility. However, if the land is profitable, the lump sum received may be less than if the seller had leased and received royalties.

According to the website of The Mineral Auction, other pros of selling to consider include capitalizing on the current boom in oil, favorable tax savings, and a strong investment in non-depleting assets. If you are interested in leasing or selling your mineral rights, contact a mineral broker in your state.

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