Following up on our recent post about mineral rights and mineral ownership, we want bring you some of the key things to watch out for if you plan to sell the mineral rights below a piece of land that you own. To help us out with this we have our good friend Adam who worked in mineral acquisitions for Ferrari Energy, a mineral business working out of Denver, Denver Colorado. After your due diligence is complete on the deal that you are looking to make, and once the valuation has been agreed, here is what you have to watch out for. 

Getting Lowballed

 If you have received an offer which is significantly lower than the valuation of the mineral rights then this is a cause for concern and it is likely to be a bad faith offer. You may think that someone has made a mistake at first but this isn’t what has happened, it is more than likely that whoever you are dealing with doesn’t believe that you know enough about this business and that they are trying to take advantage of that. 

Time Pressure

You should be given sufficient time to review your offer and consult with any advisors and experts. This is why an offer which has an expiration time is something which should be a cause for concern. Any pressure on time such as 24 hour offers or immediate acceptance should be refused on the grounds that you don’t have enough time to properly review, don’t be pressured into your decision. 

Bank Drafts

A well known business with a good reputation will look to pay you via certified check, wire transfer or a cashiers check. When you make a transaction like this you will have those funds available to you on the same or the next day. If however you are being offered a banker’s draft by way of payment then those funds will not show for weeks, which of course could cause you some problems. Reputable companies don’t act like this so if you have been offered a banker’s draft, you may start to call into question the company that you are dealing with. 

Fine Print Tweaks

There is much in the small print too pay attention to and if you aren’t sure of what you are looking for then you should get some support with this. One thing in particular which you should keep a keen eye out for is the mineral acre versus the royalty acre, which are two very different things. For example you may believe that you are selling a non-participating royalty interest, when in fact you are actually selling the minerals. This is a huge difference on the deal and it is why there is a need to ensure that all of the fine print has been properly read, and that everything is in order. 

Make sure that you are full committed to poring over every detail of this deal.