Reasons Why Selling Your Mineral Rights Now Is a Good Idea

Mineral rights can provide financial relief and are very lucrative when sold. While it may be tempting to immediately lease the minerals, there are many advantages and drawbacks that come along with leasing. There is always the chance that production will not start, the underlying minerals are not as rich as assessed, or a myriad of other possibilities that can make leasing a risk for the mineral owner. However, selling minerals outright will provide many advantages, but a person has to act swiftly to ensure that their minerals still retain their current value.

The Value Can Dissipate Fast

Minerals are valuable and production companies will act quickly if they believe that the minerals are of high value. Oftentimes, an estimate will be made and the potential buyer will offer a large sum for the minerals. While some owners jump at the chance of selling, others wait for a better offer only to find out that their minerals are worth far less than what was once thought. With the possibility of the mineral’s general value declining, it is often better to sell immediately than wait for a better deal that may or may not come along.

Instant Financial Relief and High Prices

Mineral prices are at a high. Gas and oil are being sold for much higher prices than that of ten years ago. With a sale, an owner will receive immediate compensation and will not have to worry about the state of mineral prices again. With the current high value of minerals and the instant financial relief, selling minerals may be the answer to your financial problems. While the residual income from leasing may seem enticing, income is only based off of production. If no production is taking place or the minerals are not as rich as first thought, the royalty checks may dwindle or cease altogether.

Alternative Energies Make Mineral Rights Uncertain

Oil and gas are the most widely used source of energy at the moment. With such high demand, their prices are favorable. Alternative energies are starting to gain traction and have started to be utilized in automobiles, home electric and various other sectors.

With the expansion of alternative energy sources, it is likely that the price of your minerals will decline over time. Once a better energy resource becomes widely available, your minerals may not be worth 10 percent of their current value. Selling now, while the value is high, reduces the risks of alternative energies causing your mineral’s value to drop before you have had a chance to sell.

Low Federal Tax Rates

Currently, mineral rights are taxed based on capital gains. When these minerals are sold, the seller will only have to pay a 15 percent tax on the minerals that they have sold. This is exceptionally low in comparison to leasing which is taxed at 36 percent. Selling, from a tax-based perspective leaves more of the money in the seller’s pocket and makes more financial sense than leasing which can be risky in terms of profits and taxes.