Common Mistakes when Selling Royalties
If you own royalties, bookmark this page immediately! You don’t want to forget these common mistakes when selling royalties. After spending years in the industry speaking with royalty owners, we’ve seen the same mistakes over an over again. Learn from our years of experience and don’t make the same mistakes they did! If you want to sell royalties for the highest possible price, carefully consider all the options below.
Accepting the first offer to Sell Royalties
If you only take away one thing from this article, let this be it! The worst mistake you can make is to accept the first offer you get. When you are receiving royalty income, you’re in the position of power. There are a large amount of buyers out there who would all be interested in your royalties. You’re almost assured to sell below market value if you sell royalties to the first buyer who makes you an offer.
The reason it’s so important to get multiple offers is that you want to know for a fact you are getting the best possible price. Unlike the housing market where you can quickly get an estimated value by comparing homes in your area, this information is not available for royalties. There are a large number of factors that play a role in the value. This means that the only way to determine the true value is to get your property in front of a large amount of royalty buyers.
When you get your property in front of a large amount of royalty buyers, these buyers will all compete to pay you the highest possible price for your property. What does this competition mean for you? More money in your pocket! As a mineral owner, you want to know you got a fair price and the right deal when you sell royalties. Make sure you entertain multiple offers from buyers before you sell royalties to anyone!
Offer to Sell Royalties in the Mail
Received an offer to sell royalties in the mail? You’re not alone! Thousands of these letters get mailed out everyday to people with royalties. Their goal is simple. Locate someone who wants to sell royalties and make them an offer. They are hoping that you don’t find anyone else who buys royalties so they can quickly take advantage of the situation. They will frequently put a time clock on the purchase and not give you enough time to make a well thought out decision.
Don’t make the mistake of selling to someone who sends you a letter in the mail. While you could receive a good offer this way, you should get a few more competing offers to ensure the offer made the mail is fair. Maybe it is, and maybe it’s not a good deal at all. Until you get multiple offers, you just won’t know!
Underestimating the Value
Since oil and gas has very little information available compared to the housing markets and stock markets, it can be difficult to value your royalties. As a royalty owner, you may not have a clue what the value is. That’s ok! If you want to estimate the value of royalties, you can take the average amount you receive each month, and multiple it by 4 years to 6 years. While you could sell royalties for more or less than that amount, the amount you receive will generally fall in this range.
To quickly see how much selling royalties could be worth, enter the average amount you receive into box 1 below:\
As you can see, there is quit a range in value! Why does this happen? Because there are many factors that affect the value of selling royalties. Each of these will change the price a buyer is willing to pay! Things like oil and gas prices, additional production, and your lease (to name just a few) are are important.
Not Providing Documentation
Want to sell royalties for the highest possible price? The more documentation you can provide, the more you will get for your property. Why is that true? You will attract more royalty buyers with more documentation. Many buyers won’t be interested if you simply tell them that you own some royalties and ask for an offer, you need to provide documentation that proves it.
Here are the most important documents to have available (Bold indicates most important!):
- Check Stubs (Preferably 6 months to 12
- Previous Years 1099’s
- Lease Agreements
- Division Orders
- Mineral Deed
- Previous Offers Received
- Title Work
Considering Selling Royalties?
If you are considering selling royalties, fill out the form below. Our family owned company has been helping royalty owners connect with buyers for years. We work with a huge network of royalty buyers who will pay top dollar for your property. The best reason to fill out the form below is that we will have multiple offers in the door for you very quickly. Our network contacts and years of experience help royalty owners get multiple offers in the door quickly!