In a perfect world, you sell your mineral rights and buy some new ones on the same day. Given that things rarely turn out perfectly, here are some things to keep in mind as you negotiate the sale of mineral rights in one area with the purchase of rights in another.
Time it right
If doing a 1031 exchange, have both mineral rights desired to be purchased locked in Contract along with Contractual buyer ready to close on yours.
Selling First
Selling your mineral rights before buying new ones minimizes financial hazards. .
Until most of your contingencies have been met, wait to put an offer for other minerals. You don’t want to be left holding the bag, or in this case, the minerals.
If you’re ready to accept an offer on your minerals, but haven’t found the right new minerals, negotiate a long escrow. This will give you more time to look for the new minerals.
Buying First It happens. You’re only thinking of buying, and suddenly the right minerals shows up. Now you have to sell your old minerals. Here are some tips on making things work in your favor:
Negotiating a long escrow on this side of the sale works, too. You can also make the purchase contingent on your minerals selling. This will work better in a slow market, but it’s worth a try in any market. You never know what may also work best for the seller of the minerals you desire.
Try and schedule the closing date of your current minerals prior to the closing on your new ones.
Take a close look at what price you’re going to ask for your minerals. Make sure it’s realistic in the current market.
When you get an acceptable offer, check the buyer’s credit history. You don’t want any surprises that are going to delay things. If you’ve closed on the new minerals, but haven’t sold the old ones, consider taking them off the market until the market improves.
Show Me the Money
Make sure you have a tight hold on, and a clear understanding of, your financial situation. Cash reserves are always helpful, but never more so than during the purchase of minerals. Two to three months is the recommended reserve. If you’re a smart shopper/seller, you’ll accept an offer from someone who’s flexible about closing dates.
