Top 5 Things To Avoid When Selling Royalties!
April 17, 2017
Selling royalties can be challenging, as there is a great deal of research involved. While there is currently a high demand to buy royalties in Texas, sellers must be extremely careful or risk being taken advantage of by less ethical buyers. For the best deal, those looking to sell royalties must avoid the tips referenced below and seek the assistance of a reputable royalties company to protect their interests along the way.
1. Never Accept the First Offer
Purchase offers should be carefully scrutinized to ensure they are fair offers that are based on current market prices. Low-ball offers that come out of the blue are common, so it is never a good idea to accept the first offer. Buyers have done their research and many will attempt to get what they want as inexpensively as possible.
The best way for those selling royalties to proceed is to have the worth of their royalties determined by a reputable company, then seek competitive bids to get the best price. Typically, where there is one buyer interested in a sale, there will be others interested as well. Some may even make higher offers based on the actual determined value.
2. Don’t Toss Those Statements!
To get the most for any royalty, a seller must be able to show prospective buyers how much they are currently earning. Keep one to two years worth of royalties statements on hand to document how much the royalty is paying, since buyers are going to ask. Tax records, including 1099 forms, are also helpful for documenting earnings and determining worth.
3. Don’t Ignore Oil and Gas Prices
Even though owners may receive a check every month, the value of their royalties as well as the amounts of their checks will fluctuate with the market price of oil and gas. Always keep this in mind if the desire or the need to sell royalties arises since they are naturally worth more when mineral prices are higher and less when prices are lower.
4. Don’t Believe All the Rumors
Selling royalties can be especially tricky for owners since there are so many rumors about sales prices, both high and low. In either case, it can be detrimental for an owner to give too much credit to hearsay information about how much other property sold for or that they can only get so much for theirs.
Owners looking to sell royalties need to avoid unrealistic expectations that could prevent them from taking advantage of a good offer. At the same time, they must avoid giving away their ownership at an undervalued price. The best solution in both of these circumstances is to work with experienced professionals who can determine the true value of the royalties right now, then help owners find buyers willing to pay as close to this amount as possible.
5. Don’t Try to Sell Without Help
Considering the complexity that goes with valuing and selling mineral royalties, owners with little know-how increase their risk of being taken advantage of by trying to go it alone. It is a good assumption that buyers, especially those who make an offer out of the blue, know a lot more than most sellers do in terms of valuation. This alone suggests that wise sellers should seek the assistance of a well-established royalties company with a good reputation in the business.
These companies will ensure that sellers understand the worth of their royalties according to current market conditions and that they have access to buyers who are willing to bid on them so that sellers receive the most money possible.
Those looking to sell royalties must avoid the mistakes that could cost them a great deal of money in the long run. Sellers must always consider the fluctuation of oil and gas prices, keep good records of their payouts, and have realistic expectations. The best option is selling royalties through an experienced company that can protect an owner’s interests and help them find buyers willing to pay fair prices!
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