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What Is Underneath Your Home? A Guide To Understanding Mineral Rights

Mineral rights are a type of ownership to the minerals and commodities that lie beneath your property. This entitles a party to come in and extract the oil, coal, stone, or other matter from your land, based on the terms of an agreement. This may be a cash sale paid to the land owner, or it may include royalty payments from the proceeds of the extracted commodities; of course, the land owner also has the option of contracting with a mining company without selling the rights to their property, too.

Some common questions regarding the sale of mineral rights include these:

Do I need to worry about mineral rights?

Mineral rights may seem like something that you don't have to worry about; however, they could be quite relevant if you are planning to purchase a property. Mineral rights may present an opportunity to make money from something that you have no use for, such as unprocessed oil or coal. However, for others planning to build or develop on a plot of land, this entitlement could present challenges and obstacles.

What types of things are extracted?

Companies looking to buy the rights to mineral extraction on your property typically are seeking to find oil, coal, or gas. There are some that may want the granite, stone, sand, or even gravel. Be sure to clarify if the buyer is entitled to the one specified mineral or commodity, such as coal, or if you are signing off on the rights to any known or unknown minerals that could be lurking beneath the surface of your property.

What are the perks of selling mineral rights?

The most alluring incentive to sell rights is typically money. Some individuals may have land rich in a particular mineral or commodity, but lack the skills and equipment to extract and sell it. Selling mineral rights entitles the land owner to a percentage of the profits from the sale and processing of these valuable commodities.

What does this mean for home buyers?

This essentially means that home or real estate buyers should be aware of any red flags that arise during the title search for their new property, which will reveal any rights to minerals or commodities. Many of these agreements and sales took place decades earlier, without a specific expiration date. If someone does have mineral rights to your prospective property, know that they may be entitled to bring in heavy equipment, dig holes, and excavate, depending on the terms of the agreement.

There are advantages to selling the mineral rights of your land, as long as you know what you are committing to. Talk with a real estate lawyer to determine if selling mineral rights makes sense for you and your property.