Would you buy land w/o mineral rights?

Would you buy farm land w/o mineral rights or royalties? and if so what would you pay for it?

The 3 I have found sold the land 57% less than the apprasied value.

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Permalink Reply by Jim Litwinowicz on February 16, 2012 at 12:44pm

Just to give me .02 cents.... The split estate issue has been around for decades as many people own the surface but not the coal rights.  And I would much rather have a gas well nearby than a strip mine.  Real estate has adapted to the coal issue and will with the gas/oil issues.

If the land has a bad lease, that would detract from its value, IMO.  No one would want to own land with a large compressor station on it. If the lease is about to expire, it may be worth a little more. If there is a well with royalties being paid than the lease is even more important as it will be in affect for decades.

One option is negotiate for a portion of the rights, say 10% or 25%.  That would give the surface owner some say so in well location and other issues, depending on the lease language. And it will give some compensation for any inconveniences if and when a well is drilled.

And speaking of compensation, if the lease states that there is a spud fee or some other compensation for a well pad located on the property, be sure that those fees go to the surface owner should you buy a parcel that is leased.

Permalink Reply by Sarah on February 16, 2012 at 1:28pm

Extending the discussion further....."right price" in your opinions, now at this current time, what would your price be to buy land with no MR's? Example:Appriased at 2k an acre with them......??

Permalink Reply by Sarah on February 16, 2012 at 1:29pm

Also what specific things on the lease would you make sure you looked at....what make it an "awful" lease?

Permalink Reply by Mike h on February 16, 2012 at 1:38pm

A clause such as "the right to use any and all water except for household water".

Injection wells.

No restriction on placement of surface installations (wellhead, compressor, etc). This doesn't mean an outright ban, it means that they should have to consult with the surface owner (this could be assigned from the mineral right owner)

Not requiring double ditching for any pipelines or subsurface work.

Holding ponds (Not going into detail here, just pointing out the issue.)

No clauses specifying repair of any damage caused to surface structures (fence, outbuildings, etc)

An overly broad indemnification/hold harmless clause.

Permalink Reply by Jim Litwinowicz on February 16, 2012 at 2:13pm

no restrictions on regional ponds. foreign pipelines, compressor stations, no Pugh clause, no pooling restrictions, bad setbacks, gas storage fields, no deductions from royalties,

Permalink Reply by Mike h on February 16, 2012 at 2:22pm

Jim,

Why would she care about a pugh clause or deductions from royalties if she doesn't own the mineral rights?

Permalink Reply by Jim Litwinowicz on February 16, 2012 at 2:28pm

I stated earlier that I would try to negotiate in a 10% to 25% interest in the rights.  And those would affect the value.  If I failed to get any portion of the rights, then those two items wouldn't matter. I shoulda made that clearer.

Permalink Reply by Sarah on February 16, 2012 at 2:32pm

I don't think the owner would go for that #1, and #2 I would try if I thought there was anyway a well would go on the property, with as land locked as it is and with free fields all around I dont' see it happening.

 

Permalink Reply by Mike h on February 16, 2012 at 1:34pm

If you are looking at it as farm land then base it on ROI. Is it pasture? ground suitable for row crops? How quickly will you recoup your money? To me the price would be dictated by he specific piece of ground.

 

Permalink Reply by Sarah on February 16, 2012 at 1:43pm

Thanks so much Mike h, very good info. We have the land leased to use as farm land but it hasn't been farmed in over 20 years, in the last 2 years my hubs has done all the imporvements there is now and 8 acre hay field and 20 acre beans last year. Being that it is supposed to be 60 tillable there is a ways to go, 20 acres is wooded... it's very over grown and there is not road access so everything that was used to get to the land for ANY improvements came from a drive that we put in 2 years ago. we already have quite a bit of money and A LOT of time in the property w/o owning.

Permalink Reply by Billy Park Whyde on February 16, 2012 at 1:35pm

Sarah that price is not really a issue as whoever owns the property sets the price. You may have missed this but if you look over this you might get an idea of what sellers are asking under the typ of questions posed in this thread. 

Permalink Reply by Billy Park Whyde 1 hour agoDelete

Not promoting anything here but what is happening with this question as to property value?  This link I pulled out of the blue in a Google search. O the right side scroll down to chose a county in Ohio to view the listings. Some list the mineral rights issue some don't (probably to suck in potential buyers) http://www.landandfarm.com/search/Ohio-land-for-sale/

Permalink Reply by Sarah on February 16, 2012 at 1:43pm

Thanks I will check this out!

 

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