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Old 04-20-2008, 10:41 AM
 
Location: Dallas Texas
165 posts, read 629,245 times
Reputation: 132

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I'm shopping for a house in the Dallas / Fort Worth area, and was hoping a few of you real estate pros could offer your thoughts on this topic.

It seems like for every house I am interested in, the seller has a clause that says they will be retaining the mineral rights when the house sells. And I'm not looking at multi-acre type properties here...I'm looking in residential neighborhoods where the homes are on 1/5 or 1/4 acre plots of land.

One seller even said he'd let me keep the mineral rights if I pay more than asking price for the house. This just seems wrong to me. I mean the mineral rights are supposed to come with the house. Thats like saying, "if you want the roof, that'll cost you extra". I can understand the buyer getting a lower price if they let the owner keep the rights, but charging extra for them just seems very wrong to me.

My big concern is this; If I give up the mineral rights, am I going to have trouble selling the house in the future?

So what do you pros think of this? Is it going to come back to haunt me at resale time, if some 3rd party owns the mineral rights?

Any other things I need to consider when negotiating these rights, or buying a property where the seller keeps them?

Thanks!
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Old 04-20-2008, 11:02 AM
 
57,955 posts, read 29,481,080 times
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Depending on where you live, some areas do not have any properties with mineral rights involved. As for your property and how important it is, I dont think anyone here could advise you on that without knowing if minerals are located on the property. Its one thing to say its not important if nothing is there, but without knowing if the property is sitting on an oil field, no one here could advise you of the importance.

You have to remember that everything is up for negoations.. If you say you're willing to pay X, but only if it includes all rights to the property, thats a legit offer for the seller to consider. Just because they are asking to retain the mineral rights, does not mean that you cant make an offer for the property that does not allow them to transfer the rights to you.

On that size of a lot, I'm not sure I'd be worried about it. Where I'm from, its typical that property owners do not have the mineral rights to the land they own.
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Old 04-20-2008, 01:36 PM
Status: "It's 5 o'clock somewhere." (set 23 days ago)
 
Location: Mountain Ranch, CA The heart of Calaveras County
6,175 posts, read 11,595,668 times
Reputation: 4950
I'm sure TX is much different than CA just in terms of the minerals sought after. Around here it's gold and down there it must be Texas Tea. Here, the local government would make the holder of the mineral rights go through such an environmental hassle it hasn't proven to be worth it to anyone to actually attempt to explore for what's below. I'm sure it's much less intrusive to drill for oil.

I concur with you about the seller demanding more fore the mineral rights. I'd check with the local zoning/land use agency to see if they would permit drilling on so small a piece of land anyway. Since oil exists in pools under the ground, a drilling company could drill on the next door property and suck up all the oil underneath yours and no one would be able to prove anything different.

I'd try to keep the rights if it all possible.
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Old 04-20-2008, 03:13 PM
 
Location: Dallas Texas
165 posts, read 629,245 times
Reputation: 132
Mineral rights are a big deal in D/FW because a few years ago they discovered there is a huge amount of natural gas under the area. So now the gas companies are approaching home owners about leasing the mineral rights to their property, in exchange for cash compensation. The gas companies have a way of drilling horizontally from a mile away, so their drilling rigs typically aren't right in your neighborhood, but they can be close enough to be a nuisance.

As far as compensation, you typically get a signing bonus of a couple thousand dollars, and then a royalty payment for any gas they take from under your land. I've heard some people say the royalty payments amount to $10 a month, and others say they make a few hundred a month.

All in all, I've found it really difficult to find any definitive answers as to how much money a homeowner can make. It seems to vary from town to town, and residents in different neighborhoods can make varying amounts as well.

Most of the drilling hasn't begun yet, or they've only been drilling for a short time. So speculation is wild about the money to be made. Only time will tell, but I don't figure people are going to get rich off of this...especially when they only have 1/4 acre land.

My big concern, is how is this going to impact my resale value if I can't pass along the mineral rights when I sell the house?

It's possible that 5 or 10 years from now, nobody will want to touch a house where they can't own the mineral rights. Or its possible that this is all hype, and nobody will give a hoot either way.
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Old 04-20-2008, 03:17 PM
 
57,955 posts, read 29,481,080 times
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Quote:
Originally Posted by bigdummy View Post
Mineral rights are a big deal in D/FW because a few years ago they discovered there is a huge amount of natural gas under the area. So now the gas companies are approaching home owners about leasing the mineral rights to their property, in exchange for cash compensation. The gas companies have a way of drilling horizontally from a mile away, so their drilling rigs typically aren't right in your neighborhood, but they can be close enough to be a nuisance.

As far as compensation, you typically get a signing bonus of a couple thousand dollars, and then a royalty payment for any gas they take from under your land. I've heard some people say the royalty payments amount to $10 a month, and others say they make a few hundred a month.

All in all, I've found it really difficult to find any definitive answers as to how much money a homeowner can make. It seems to vary from town to town, and residents in different neighborhoods can make varying amounts as well.

Most of the drilling hasn't begun yet, or they've only been drilling for a short time. So speculation is wild about the money to be made. Only time will tell, but I don't figure people are going to get rich off of this...especially when they only have 1/4 acre land.

My big concern, is how is this going to impact my resale value if I can't pass along the mineral rights when I sell the house?

It's possible that 5 or 10 years from now, nobody will want to touch a house where they can't own the mineral rights. Or its possible that this is all hype, and nobody will give a hoot either way.
I have a property where we receive $300 a month for gas rights. Its been in place for 20+ years
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Old 04-20-2008, 04:25 PM
 
4,517 posts, read 6,344,826 times
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Hey bigdummy,

Interesting question, and I sought information on when coming onto City-Data.

We have done some shopping in the area, and I agree it is an issue. The Barnett Shale fantasies run deep. After we started looking it became far more than a money thing from our perspective. While we sit on the surface of the planet and tend to think that is what things are about, from Texas law point of view, the world is sort of upside down. From

http://www.rrc.state.tx.us/about/SurfaceOwnerInfo.pdf (broken link)

Quote:
Under Texas law, land ownership includes two
distinct sets of rights, or “estates,” the surface estate and
the mineral estate. Initially, these two estates were
owned by the same person and they may continue to be
owned together by one person. However, in many areas
of Texas, especially those where there has been
extensive historical oil and gas development, it is
common for the mineral estate and surface estate to be
owned by different people. The division, or “severance,”
of the mineral estate and surface estate occurs when an
owner sells the surface and retains all or part of the
minerals (or, less commonly, an owner sells the minerals
and retains the surface). If an owner does not expressly
retain the minerals when selling the surface, the mineral
estate he owns automatically is included in the sale.
That part is all simple enough and matches what we all commonly hear, and you are experiencing. Here is the part that was a little shocking to us --

Quote:
Dominance of Mineral Estate

Regardless of whether the mineral estate and
surface estate are held by one owner or have been
severed, Texas law holds that the mineral estate is
dominant. This means that the owner of the mineral
estate has the right to freely use the surface estate to
the extent reasonably necessary for the exploration,
development, and production of the oil and gas under
the property. This right to freely use the surface estate
for the benefit of the mineral estate may be exercised by
a company or individual that has taken a mineral lease
from the actual owner of the mineral estate. The
company that takes a lease and actually operates the
property is frequently referred to as the “lessee” and the
mineral interest owner who granted the lease is the
“lessor.”

Lessee’s have broad rights to use the surface for the
purpose of exploring for and producing oil and gas.
These rights include the right to conduct seismic tests,
drill wells at locations they select, to enter and exit well
sites and other facilities, to build, maintain, and use
roads for access to and from well sites and facilities, to
build and use pipelines to serve wells and facilities on
the property, to use surface and subsurface water on the
leased premises for drilling and production operations,
and to drill and operate injection wells to enhance lease
recovery and dispose of lease-produced water.
With the limited exceptions discussed below, the
lessee has the right to conduct the activities set out
above and otherwise reasonably use the surface without
getting permission from the surface owner and without
restoring the surface or paying for any non-negligent
damages it causes. . . .
With that in mind, I would not really want to consider buying property in Texas without the mineral rights -- not for the make-believe value the mineral rights may hold, but rather so the site would not be destroyed by the mineral rights holder. When you consider the damage that can be inflicted on the property by the mineral holder without regard for the surface owner, I would split the value at about 90 / 10 or even less.

So if someone wants to "sell" the property and retain mineral rights, I would not give them more than more than 10% of the price -- and from my point of view, they would have to pay the property taxes as the Dominant owner.
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Old 04-21-2008, 12:24 PM
 
Location: Dallas Texas
165 posts, read 629,245 times
Reputation: 132
Quote:
Originally Posted by pghquest View Post
I have a property where we receive $300 a month for gas rights. Its been in place for 20+ years
Pqhquest, how big is your property...are we talking about several acres of farmland, or a 1/4 acre plot in a residential neighborhood?

Philip T, thanks for the detailed info and links. This is why I'm so reluctant to buy a house where the seller retains the mineral rights. Realistically, I'm 99.99% sure they could never erect a drilling rig in my backyard, or anything like that. But still, it's very unnerving to know that some other person basically owns your property, and can do whatever they please with it...or give the oil/gas companies the ability to do whatever they please.
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Old 04-21-2008, 12:46 PM
 
Location: Derby, KS
3,832 posts, read 8,028,770 times
Reputation: 1563
Quote:
Originally Posted by bigdummy View Post
This just seems wrong to me. I mean the mineral rights are supposed to come with the house.
Most of the mineral rights around DFW were bought and sold before your grand parents were born.
However I own 100% of my mineral rights. We built in this new development of land 5 years ago and we got the rights with the house but not one word was mentioned about it until about a year ago. A gas drilling company came to lease them from us.

Now I'm trying to sell and planned on keeping the rights....as most people do in fact. The buyer...much like you...got all bent out of shape about it.

Your standing is that you are entitled.

My standing is that you are not entitled to squat if the seller isn't willing to let go of them without you paying for them.
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Old 04-21-2008, 01:29 PM
 
54 posts, read 116,145 times
Reputation: 34
Quote:
Originally Posted by drjones96 View Post
Most of the mineral rights around DFW were bought and sold before your grand parents were born.
However I own 100% of my mineral rights. We built in this new development of land 5 years ago and we got the rights with the house but not one word was mentioned about it until about a year ago. A gas drilling company came to lease them from us.

Now I'm trying to sell and planned on keeping the rights....as most people do in fact. The buyer...much like you...got all bent out of shape about it.

Your standing is that you are entitled.

My standing is that you are not entitled to squat if the seller isn't willing to let go of them without you paying for them.
Has anyone bought your house yet? Just curious.
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Old 04-21-2008, 02:08 PM
 
Location: Derby, KS
3,832 posts, read 8,028,770 times
Reputation: 1563
Quote:
Originally Posted by Kdway View Post
Has anyone bought your house yet? Just curious.
I'm under contract. We asked to retain our mineral rights. The buyer nearly walked away from the table. So I offered him the mineral rights in return for leasing the house back to me free of charge for a month after closing (so kids can finish school)

Basically I get $1300 worth of credit in exchange for mineral rights that haven't made a dime for me except that measly leasing bonus over a year ago.
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