Seller Conveys Mineral Rights... Yes or No ?

By
Real Estate Agent with New Home Hunters of Fort Worth and Tarrant County
http://actvra.in/5Jq

I went on a listing yesterday.  Everything was going just fine.  My suggested pricing was accepted.  I also suggested that today's buyer... perhaps more than ever... might be in need of having some or all of their closing costs paid by the seller.  That was fine, too.

We walked through the home, and I made various suggestions about making the home more ready for showings.  I suggested thinning out the closets of items of clothing that the seller will not be wearing over the next four to six months.  I suggested that since she was not going to be wearing her winter clothes, and sooner or later she was going to have to pack them... she might as well pack them up for moving now... and make the closets look larger. 

All was going well... everything I suggested was being accepted... until my seller brought up the subject of "mineral rights." 

A large natural gas field has been discovered here in Fort Worth.  For the past year to eighteen months... much talk has taken place about signing over "royalty rigts" for the building lot people's homes are build on.  Many have done this, and most owners who put their homes up for sale... are insisting that they keep the mineral rights... and not convey them to the new buyer.

This... can cause problems... because most buyers who purchase... expect those same mineral rights to remain with the property.  They feel they are paying for the home... and want all the rights pertinent to the home... to convey with it.  It makes sense to me.

Of course... my seller wanted to retain her own mineral rights... and not convey them to the new buyers.  We chatted about it, with my suggesting that it would make the home more saleable if she, the seller, also conveyed her mineral rights along with her title.

She again insisted they not convey, and started becoming more than a tad belligerent.

So... I asked my seller if I could tell her a few stories.  Yes said... "sure !"

I asked her to pretend that she was going to be making an offer on her next home.  I suggested that we offer the seller an amount what was within 3% of the seller' asking price, and that the seller deliver posession within thirty days.  I suggested to her that the seller would probably accept an offer like that.  She seemed pleased.

I then asked her:   What if the seller... gave you everything you asked for in your offer... but was insisting on just one very simple thing? 

What if... the seller was absolutely insisting that... after she moved in... that the seller be able to retain his own key to her home... and whenever he happened to be in the neighborhood... he would be allowed to park his car... use his key... and walk in to her home and use her bathroom.

Her eyes opened wider than I had ever seen them.  She stammered, and then said... "What !  He wants to still be able to stop, use his own key, and walk into MY home and use MY bathroom ?  Why in the world would I agree to let him do that ?  It's my bathroom... and no... he cannot continue to use it.

I then asked her:  What was the difference between her seller continuing to use her bathroom after he no longer owned the home... and  her continuing to reap the royalties on the natural gas lease... under HIS home... after she sold him the house and he owned it ?

She sat silently.  At first she looked puzzled.  Then... slowly... a smile came to her face.  She said... "Well... no, he can't still use my bathroom... and ok, I get the point, I won't insist on keeping the mineral rights after I move."  She laughed... she told me I made my point... and she signed an addendum agreeing to convey the mineral rights to the new buyer.  Whew !

How do YOU handle the subject of both seller and buyer both wanting to retain mineral rights ?

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Rainmaker
996,054
Karen Anne Stone
New Home Hunters of Fort Worth and Tarrant County - Fort Worth, TX
Fort Worth Real Estate
Pat:  Thanks so much for those very kind words.  I appreciate them.
April 15, 2008 10:21 PM #88
Rainmaker
996,054
Karen Anne Stone
New Home Hunters of Fort Worth and Tarrant County - Fort Worth, TX
Fort Worth Real Estate
Tom:  It is surely a very juicy can of worms.  Drilling from the side would have to be done from pretty far away... and this is a multi-block neighborhood with very small lots in it.  Lotsa wormies !  Not a good plan.
April 15, 2008 10:22 PM #89
Rainmaker
996,054
Karen Anne Stone
New Home Hunters of Fort Worth and Tarrant County - Fort Worth, TX
Fort Worth Real Estate
Cindy:  You have a "spot-on" understanding of the situation.  I am impressed.  Thank you for your kind words... and I am always happy to share.  By the way, I read your profile, and noticed you are a newbie.  Welcome to Active Rain :)  I will be sure to comment on your first blog post.  Take care... and again, thanks for your kind comment.
April 15, 2008 10:26 PM #90
Rainmaker
996,054
Karen Anne Stone
New Home Hunters of Fort Worth and Tarrant County - Fort Worth, TX
Fort Worth Real Estate
Todd:  In Portland, the homes are older, and this same scenario would not apply.  In some of the newer neighborhoods... like in Hillsboro and further out, things similar to this would be more common.  And... thank you so much for your kind compliment.  I appreciate it :)
April 15, 2008 10:27 PM #91
Rainmaker
996,054
Karen Anne Stone
New Home Hunters of Fort Worth and Tarrant County - Fort Worth, TX
Fort Worth Real Estate
Becky:  You are welcome.  It was nice of Marchel to include me... and you too, with your history of Desoto.  Congrats to you !  And yes, with all the new construction around you, this will come up... sooner or later.  Take care...
April 15, 2008 10:29 PM #92
Rainmaker
996,054
Karen Anne Stone
New Home Hunters of Fort Worth and Tarrant County - Fort Worth, TX
Fort Worth Real Estate
Christy:  Yes, that would be both most unusual, and very silly.  That is why I used that as an obvious example so the seller would see my point.  Thanks so much for your comment.  Take care.
April 15, 2008 10:32 PM #93
Rainer
15,900
Tyler Wedel
THIRD TENNESSEE REALTY - Monterey, TN
Quite a drastic approach to getting the point across but I like it and it worked. WAY TO GO
April 16, 2008 03:21 PM #94
Rainmaker
996,054
Karen Anne Stone
New Home Hunters of Fort Worth and Tarrant County - Fort Worth, TX
Fort Worth Real Estate
Tyler:  I must disagree with you.  Drastic ?  What is drastic about telling a silly little story?  But yes, it got the point across in a very harmless, but very low-key and humorous way.  And... she has told that story to just about every one she knows... including a street full of neighbors.  I think I may be tending towards celebrity status here... LOL.  Thanks for the compliment...
April 16, 2008 05:12 PM #95
Rainer
3,635
Leigh York
CENTURY 21 Judge Fite Company - Weatherford, TX
ABR,GRI,CRS

I'll remember your "story".  I'm dealing with this every day.  What concerns me most is that we aren't licensed to negotiate minerals but we're almost forced to on every transaction.  I appreciate the new TAR form but it's only a start.

What do you think, Karen?

April 17, 2008 09:45 AM #96
Anonymous
Anonymous
Charles

After about 20 posts, I believe I got the point.  Once thing to consider from the seller's perspective, with even the current price of gas, the amount of royalties that could come from even an acre lot under a house could equal from $600-$1000 per month.  My believe is that the agent did a dis-service to their selling client and that especially here in Ft. Worth, the money is good enough to hold onto.  My vote is hold onto your mineral rights... I do!  It works out well.  If someone has about 7-10 acres in their name, they could moderately retire.

This is only my personal experience and opinion.

March 11, 2010 04:31 PM #97
Rainmaker
996,054
Karen Anne Stone
New Home Hunters of Fort Worth and Tarrant County - Fort Worth, TX
Fort Worth Real Estate

Charles:  The focus of my post... was meant to deal with typical small new home development lots... usually 50 x 110... sometimes 55 x 115 or 60 x 115.  No acreage.  So... we are not talking about very much of a royalty.  But, the point is... if the same buyer/seller wants to buy and GET the mineral rights included (which is the typical situation) and then sell their home and KEEP the mineral rights rather than convey them to the new buyer... it is out of balance.

I guess if a seller wanted to "have it both ways"... I understand that.  I am more interested in fairness... and in getting a good price FOR my seller.  That usually means to convey the small-money-amount of mineral rights royalties back to the buyer.  Again... we are probably talking about no more than .15 acres.

Is that enough to lose a sale over ?  Is that enough to fight over ?  Usually... the answer is no.

Obviously... if you are talking about "acreage"... like the 7-10 acres you use in your example... that is a different story.  But... then again... if the seller keeps the mineral rights... that definitely makes the acreage worth LESS... to just about any buyer who is also contemplating buying acreage... and GETTING those same mineral rights.

                                                                                                                             ( March 11, 2010 )

March 11, 2010 07:43 PM #98
Anonymous
Anonymous
Glo

I bought a home in central arkansas in 2007, the real estate ad did not mention any word about mineral rights until we came to look at the home and we were told that everything conveyed.  My sons' were with me when we looked at the property and when we were standing in the kitchen with the agent and she said everything conveyed; my son said "Mom, that means you get the mineral rights, so I would offer them the asking price!"  Well, we did offer the asking price and signed the iniitial contract, which was 3 pages long and never received a copy of the initial contract we signed and there was no mention of mineral rights in the contract.  About 10 days later the agent faxed me a very long contract and had typed in "mineral rights do not convey"  when we called her to ask her about the mineral rights, she told us that the railroad company had bought them back in the 40's and the seller did not own them.  Told that we signed the contract and found out that she lied to us and the seller did own them.  We originally owned 1/2 of the minerals and did a refinance a month after the purchase of the home and the sellers signed a new deed in which there was no mention of the mineral rights at all and the oil and gas company told us we owned all of them and we had to pay the taxes on the wells, which we did.  The sellers put a claim in saying there was a mistake and that they were keeping the rights.....now we have to fight for the rights we believed we owned from the time we looked at the home and the real estate agent lied to us and we signed the contract.  Now we have a big mess on our hands.  Can we sue the agent for lying to us originally?

October 12, 2010 11:51 PM #99
Rainmaker
996,054
Karen Anne Stone
New Home Hunters of Fort Worth and Tarrant County - Fort Worth, TX
Fort Worth Real Estate

Glo:  I am not sure who you can sue, because I am not an attorney.  I would get one if I were you... a good REAL ESTATE attorney.  Call your title company and have them suggest one for you to use.

It sounds to me that this agent, at the very least, is in violation of the Realtors Code of Ethics.  I would talk to the attorney, and do whatever they think is best.  I would also suggest filing a complaint with the State Department of Real Estate.  Good luck to you.

October 13, 2010 04:13 AM #100
Anonymous
Anonymous
Glo

Well, we went to the real estate company that the agent worked for at the time we bought the home to see if we could obtain the original ad and the original contract, but to our dismay the file was not found.  The owner of the company said he worked as an agent and knew the agent that was representing the seller and now he is the owner of the company.  He said they keep the files for 3 years at least, but he could not find ours.  He had files that went back as far as 2006.  He also stated that he would write us a letter stating this fact and that ours could not be found.  Sounds a little shady to me.  The title company tried to say that they made an error on the deed and wanted us to sign a correction deed which would give the sellers all the mineral rights, of course, we did not sign it.  I do have an attorney, we have 20 days to give an answer, cuz the sellers are trying to claim the mineral rights.  We seem to have the worst luck with everything...the atty was going to do it on a contigency basis and we signed a contract with him to that fact, now he wants us to sign a new contract, but he wants money up front now, so I'm hoping he files the answer as I do not get paid until the 1st of november.  The fact is the agent lied to us period....we are so upset about this whole matter.  My son was recently robbed and shot and is now a quadrapalegic and the expenses for his needs exceed our income and even with other resources, it doesn't cover all his necessary supplies, meds and rehab. The monies from the royalties would sure help immensely with some things that are not covered.  Thought I'd give u the latest update.  Please pray that with us that things go well for us!  Thanks!

October 19, 2010 11:12 PM #101
Anonymous
Anonymous
Dana

Wow! I have read through this because I am about to sell my house. And am thinking about NOT conveying the mineral rights in the sale. I am about to inform my real estate agent of my intent, and I certainly hope that I don't get the "story". Having the mineral rights and having a key to someone's house are not the same. With a residential lot, there is not the possibility of a well being drilled, nor anyone needing ingress/egress rights on your property, etc... So other than someone drilling a well or coming onto the property , what is all the hubbub about keeping the mineral rights?

And I don't know what all the congratulations are for either. I certainly wouldn't appreciate it if I were the clients being talked to like "seventh graders"? Nor, if I were a real estate professional, would I post things like this on a blog where potential clients could read it. First impressions and all...

July 21, 2011 12:01 PM #102
Rainmaker
996,054
Karen Anne Stone
New Home Hunters of Fort Worth and Tarrant County - Fort Worth, TX
Fort Worth Real Estate

Dana:  Obviously, those two are not the same... but the silliness of keeping a key is the point I was trying to make.  What my point was... was that if you are talking about moving FROM one residential city lot, and moving TO one residential city lot... it makes no sense to insist on keeping the mineral rights on the lot you are selling, and to INSIST on getting the mineral rights for the lot and home you are buying.

Do you see the inconsistency here?  And also... I kept this post "public" because I thought what I was saying was correct... and honestly, I DO hope that a lot of potential clients see it.  If they agree with me, great.  If they disagree with me... they can find themselves another Realtor who suits their unrealistic needs.

Thank you so much for commenting on my post.  My absolute best to you in all your real estate needs.  Have a great week.

                                                            July 21, 2011

July 21, 2011 12:18 PM #103
Anonymous
Anonymous
Linch

Karen, give us some statistic data about the mineral right convey or not:

What the percentage in DFW area, the seller convey the right wholly??

August 03, 2011 03:14 PM #104
Anonymous
Anonymous
James

I have been looking for investment property in the Dallas/Fort Worth area and came across one listing that stated that the mineral rights do not convey.  Not knowing what that meant, I looked it up and came across this site.

After reading the majority of posts, I'd have to agree with Karen on this.  As a buyer if I am looking at a piece of property for investment purposes or even for my main home - regardless of the actual dollar amount of the royalties, I would just move on to the next listing.  Hence, a seller insisting on retaining any royalties has just lost a potential buyer.  Even if it is just $40/mo, that almost $500/year!

Quite frankly, I am amazed that there are buyers that would even consider buying without retaining any royalties - especially in this market.

March 06, 2012 12:06 PM #105
Anonymous
Anonymous
KC Jim

I read the comments here with great interest.  Why do you all suppose the railroad has retained the mineral rights on their properties since the 1800s?  Had they heard that oil companies would be "cracking" shale in 2012 to extract the resourses?  Of course not!  But, they were farsighted enough to believe that the future rights had some value.  Who knows, some scientist next year may develop a way to convert limestone into "XYZ" fuel, which will become the most used fuel on earth by 2050.  As for me and mine, we retain the mineral rights on ANY property we EVER sell!!! 

 And as to the lady who indicated that someone owning mineral rights under a property they no longer own would have to get drilling access on the property , it's as simple as leasing drilling rights on an adjoining property and diagonally boring under the property.  Think about it; not many mines consist of a single vertical shaft.  They have multiple horizontal shafts running off that main shaft. 

 As to the small 1/2 acre residential  lot not having much value as far as mineral rights, what if a single gas well drilled on that property was the largest producing well ever drilled?? 

Just saying....hindsight is 20/20 and a lot of wealth would have been in different hands if some sellers had retained mineral rights.

Just my 2 cents worth.

April 30, 2012 11:50 AM #106
Rainmaker
996,054
Karen Anne Stone
New Home Hunters of Fort Worth and Tarrant County - Fort Worth, TX
Fort Worth Real Estate

KC Jim in #108:  I understand your point... but my post is NOT about what you refer to as a "small" 1/2 acre residential lot.  They do not exist in newer homes being built in this price range.  The lots I am referring to are in subdivisions, and range in size from 50x110 to 60x120.  There is no way that anyone is going to be able to drill on a lot next to one of those... and go on an angle to pull gas out from adjacent lots.

Also... I am sorry, but I have no knowledge about railroads and their rights of way.  By the way... if a person sells a property, but retains the mineral rights... that property is worth less to a prospective buyer than a property (probably right next door... fifty feet away) which included the mineral rights.

Also... as far as a single gas well under a 50x120 lot being the source of "the largest producing well ever drilled"... I attempted to base this post in reality... speaking of subdivision lots in the $150,000 price range (including the new house)... in suburbs of Fort Worth, Texas such as Hurst and Euless... and not in far out examples that have no basis in fact or reality in these near-in suburbs.  Thanks so much for reading my post, and for commenting.           April 30, 2012

April 30, 2012 12:36 PM #107
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Karen Anne Stone

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