Selling real-estate with g/0 lease. small acreage, it worth more or less?

Selling a house with o/g lease on the lot , 20% lease.would this add value, or make no difference? no unit , no drilling at present.  

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Permalink Reply by matt on March 28, 2015 at 9:50am
Donald what state and what county are you in because that is really going to determine how much added value the minerals would add.also how many acres are available with the house?
Permalink Reply by george m vietze on March 28, 2015 at 10:11am

Depends upon the particular location, potential value of the mineral rights and the education or lack thereof that the potential purchasers have about the natural gas industry.  My experience with rural land I owned in Pennsylvania that I sold large country lots that some prospective purchasers refused to purchases a lot because of the fear that fracking could damage their water source that they would use for drinking and farming.  Others purchased the lots because having a source of energy not tied to the grid and good water supply and potential for royalty income was greater than the fear of damage from drilling and fracking.  At my age  of 77 I was more interested in the mineral rights and not interested in handling the maintainance of mowing, planting, snow removal etc of the surface rights.  I traded some land for mineral rights with a neighbor who wanted more surface land and when I sold some lots, instead of lowering the price of the land I reserved 50% of the mineral rights.  In my case the current value of mineral rights was minimmum because not many unconventional wells are being drilled because their is no marcellus in Erie County, Pa. but IMO, the Utica which is even larger than the Marcellus will someday be a viable source.  It may not be in my lifetime but I believe the mineral rights are valuable.  Advertise the property and disclose in the ad that mineral rights are leased and included in the purchase or if you wish to reserve the mineral rights state that in your advertising, full disclosure up-front will save you lots of time and attract the prospective buyers that fit your particualr criteria but IMO if you reserve 100% of the mineral rights you will limit your market, I would offer a fair value for the property and if someone offered less than your value negotiate with reserving 50% of the mineral rights for the seller and if the mineral rights are valuable to the purchaser they will be more likely to agree to full price.IMHO

Permalink Reply by Frank Walker on March 28, 2015 at 10:37am

Hi Donald.  This is only just my opinion:

If your plan is to allow buyer to take over the lease, I think that would add value.  But this would also mean you would be giving up forever your royalty rights and income.  You would be (in effect) selling those rights along with your home and land.

On the other hand:

If your plan is to reserve, and not convey, your mineral rights then I believe such a plan would reduce the value of your house and lot.  Such a plan would expose your (prospective) buyer to whatever unknowable downside eventual drilling might bring with it, with no possible benefits to your buyer . . no upside.

It is too late for you, Donald, I realize.  But for others not yet leased:

If possible lease your land beneath terms which limit surface O&G activity.  This is especially applicable when it is a small lot you are leasing, a property which going forward will exist primarily for residential purposes.  When you lease your land, read the terms of the lease placing yourself in the shoes of a prospective buyer of your home and lot.  Do this prior to signing the lease.  If the terms would be unattractive to you as a buyer of the home, they likely also will be unattractive to other parties as well, who might some day be prospective purchasers of your home and lot.  Do not unnecessarily make your home difficult to sell, because some day in the future you might want to sell.  So try to think ahead.

Permalink Reply by Donald on March 28, 2015 at 1:36pm

Thank you for excellent advice. my lease is with CHK, my lot is 11/2 arcs, but my lease is for 20% royalty, and l am in Col, Co. Oh. nothing going on as of now, but at some point should help with taxes ect. was wondering if anyone else had been in the same situation.

Permalink Reply by bootmud on March 28, 2015 at 3:42pm

Yes it adds value. That acre and half could bring in a thousand or more some day for whoever has the rights. If its the new owners of the house it could make their mortgage payment.

Permalink Reply by Paul Butler on March 28, 2015 at 3:46pm

An Oil & Gas lease is considered a BURDEN on the mineral estate and a restraint on alienability.  An Oil & Gas lease reduces the value of the property.  How much depends on the facts and circumstances.

Permalink Reply by Fred Flintlock on March 29, 2015 at 2:07am

Is it possible to get taxed on the gas and oil deed someday?

Permalink Reply by george m vietze on March 29, 2015 at 2:21am

In PA depending upon the municipality they could value the mineral rights as an interest in real estate similar to the tax on the surface rights.  If there is no drilling hence no income probably not a problem, but if the area has lots of drilling and production and landowners are receiving income...could be a problem where the municipality can appraise the value and asses a tax.....also a potential problem for estate taxes and inheritance taxes...heirs to an estate that receives "mineral rights" could be faced with estate taxes depending upon the value of the estate etc.,.  If you own valuable mineral rights and have heirs you should see an attorney who understands taxes on mineral rights.  A family trust, LLC or other vehicles may help to mitigage these problems.   Hopefully your life will get complicated with lots of money.

Permalink Reply by Donald on March 30, 2015 at 3:15am

George

Thanks for your info and advice. I will add some info for what its worth, I applyed for a refinance on another house that I owned. it was with Citi Mtgr.as we were going through the papper work, I noticed a form for me to sighn. it said than I have no oil and gas leases on the property. which I didn't , but I found this unusual , so I called the Co. and ask why i needed to sighn this form, and if I didn't would I be able to refinance. they said don't worry about it and I didn't need to sighn it. but this is in their papper work and probably applys to some other aears. if ayone else has had this happen please post.

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