Frequently Asked Questions
How long does the mineral sale process take?
It will take up to 48 hours for us to develop the strongest offer for your property. Once we have agreed on a sales price, we will enter into a sales contract. This shouldn’t take more than a couple of days to complete. Since we are internally funded and don’t have to raise the money to close, or sell your deal to another buyer, all we need after a contract is in place is time to properly evaluate the title. This is dependent upon how busy the courthouse is and the workload of our title crew, but typically no longer than 6 weeks. In certain circumstances, particularly on sales of minerals interests in well-established producing units we are able to close within a couple of weeks (Eagle Ford). We understand that sometimes a sale is necessitated by an immediate need for cash. We will do everything we can to accelerate the closing in these circumstances.
Are there any costs to me during the process?
Should you choose to have an attorney review documents, you will bear that cost. The only costs to you will be elective. Otherwise, all transaction costs will be paid by Resource Minerals.
Why does my royalty check vary month to month?
This occurs namely due to fluctuations in monthly production and commodity prices. Particularly in instances like we have experienced during the recent downturn, commodity prices may fluctuate substantially and operators may elect to cut production on low pricing.
Can I sell only part of my minerals?
Absolutely. In fact, frequently we encourage sellers to keep a portion of their minerals to hedge against long term improvements in cash flow. Many times, this allows the mineral owner to cash out a portion of the value now removing all price and production risk from the equation. If you have the ability to “let it ride,” the portion you own may become more valuable in the future, or may be preserved in your estate for your dependents. On the other hand, It is not unusual for owners who have kept a portion of their minerals to come back to us and sell the remainder. This is particularly true if cash flow continues to be depressed after the initial sale. We are happy to accommodate you in reviewing an additional purchase if this becomes desirable.
Who pays the taxes on my minerals?
In the same manner as a real estate sale, you will be responsible for the property taxes up to the effective date of the sale and we will be responsible thereafter. In some instances, folks have been behind on property taxes and the mineral interest is subject to a tax lien. We can work that into our offer price to take care of the back taxes.
Is the sale taxable?
Yes, the sale is subject to federal and state income taxes (if applicable – Texas owners don’t have to pay a state income tax). The good news is that if you have owned the minerals for a few years, the sale will be categorized as a capital gain which is potentially a much lower tax rate than ordinary income. In fact, this is potentially a large value add and reason to cash out now. Long term royalty income is subject to ordinary income tax which may be much higher. We always advise mineral owners to seek guidance from their own tax advisors on these matters.
Can the Sale be Structured as a 1031 Like Kind Exchange?
Absolutely. We have worked with sellers in the past to set up the contact consistent with a 1031 like kind exchange. This is a particularly useful tool for minimizing the income tax implications of a sale if you have real property you would like to purchase with the proceeds.
How long until I am paid?
We will establish a jointly agreed to closing date that will be spelled out in the sales contract. Typically, this is no longer than 6 weeks from the date of the contract, and contingent upon conducting a full title review. In certain circumstances, particularly on sales of mineral interests in well-established producing units, we are able to close within a couple of weeks (Eagle Ford). You will be paid by cashier’s check or bank wire at the closing table which creates immediate availability of funds for you.
How do you determine the value of my minerals?
Resource employs a very technical model of projecting future drilling and production from producing units your minerals may become a part of. It is important to note that there are no guarantees wells will be drilled and we are willing to accept the risk that these wells may or may not be drilled in the future. As we all learned during the recent downturn, new well drilling activity and cash flow from existing wells may drop precipitously and unpredictably. This is one of the main reasons many minerals owners chose to sell a portion of their assets to us – risk mitigation.
How am I paid at closing?
You will be paid by cashier’s check or bank wire. In either case, the funds are immediately available to you upon closing.
What if my questions aren’t answered here?
Feel free to contact us. Tessa will be happy to get answers for you and she may be reached by email at tessa@resourceminerals.com or by phone at 512-368-9429 x103.