How to Sell Royalties in Pennsylvania
How to Sell Royalties in Pennsylvania
With the recent drop in oil prices, we have been getting a lot more questions about how to Sell Royalties in Pennsylvania. What royalty owners are discovering is that the value of their royalties is fluctuating each month. Many royalty owners do not like the fact that they can never be sure how much they will receive. In addition, we are hearing a number of industry insiders confirm that many wells could offline to curb production. If you’re in a situation where you are considering selling royalties in Pennsylvania, this guide will explain everything you need to know. Learn how to sell royalties in Pennsylvania the right way so that you maximize the value of your royalties when you sell.
Estimating Royalty Value
Whenever we speak with a mineral owner, the very first question we get is “What are my royalties worth?”. While no one can give you an exact number, we can at least help you understand what your royalties would likely sell for. To estimate the value of your royalties, you need to know how much you are receiving each month in royalty income. To get the most accurate estimate possible, we recommend that you out how much you have received in your last 3 royalties checks.
Let’s look at an example. Let’s pretend that you got the following oil and gas royalties checks:
October – $950
November – $1,050
December – $1,000
From the 3 most recent royalty checks above, you can quickly calculate the average monthly amount as $1,000 per month ($950 + $1,050 + $1,000 / 3)
In this example, we will enter $1,000 in the first box in the calculator below. As you can see, you could expect to get anywhere from $48,000 to $72,000 for selling royalties in Pennsylvania. Where does that estimate come from? We have talked with lots of mineral owners and seen royalties sell for a number of years. On average, when you sell royalties you will get between 4 years to 6 years times the average amount you get each month.
However, it’s entirely possible that you could get substantially more when you sell royalties in Pennsylvania. There are a number of factors that affect the value of oil and gas royalties in Pennsylvania. Each of these will play a role in determining how much you get when you sell royalties. If there are additional drilling opportunities on your property, many buyers are willing to pay a premium. Sometimes that premium amounts to a lot of money!
How to Maximize Value
If you get nothing else from this guide on how to sell royalties in Pennsylvania, at least take away the information in this section. The best way to maximize value is to get your property in front of a large group of buyers.
Have we mentioned yet that the best way to put the most money in your pocket is to get your property in front of a lot of buyers? Good! Just wanted to make sure that point sunk in! Ok, I get it, I need to get my property in front of a lot of buyers. WHY?!?
The reason it’s so important that you get your oil and gas royalties in front of a large network of buyers is because it allows ALL the buyers on the market to compete against one another. What this does is ensure you get the highest possible value for selling royalties in Pennsylvania. When you put your royalties in front of all the buyers in the market, it lets you weed out the people who are not offering you a fair market value. Let’s go with another example. Let’s pretend that you put your property on the market and you get the following offers: $26,500 and $22,300.
Seem obvious right? You just pick the highest number and sell for $26,500. Unfortunately, this is where many royalty owners make their biggest mistake. They assume that $26,500 is a fair price for their royalties. However, they only checked with 2 buyers. Is that the best price you could get between 2 buyers? Absolutely. Is it fair market value? Maybe. Maybe not though. Rather than accepting the two offers on the table, you decide to see what the real market value of your royalties is. You put it on the market and in front of a large number of buyers and get the following offers:
This happens ALL THE TIME when selling royalties in Pennsylvania. Most offers fall in the $22,000-$27,000 range. You had a couple people who low balled with sub-$20,000 offers. Then you had a single offer at $48,000. Why does that happen? It’s simple. Most buyers are willing to pay you based on the amount of your royalties, plus a small premium if they think there might be production in the future. However, there are some expert royalty buyers out there who fully understand the value of your property and what it’s really worth. In addition, they can wait the 10 to 15 years for the new production to come online so they have a long term investment outlook. This allows them to pay substantially more than the other buyers out there could pay.
The point is this, if you just get one or two offers in the door and accept an offer, you don’t know that you actually got fair market value. Getting your royalties in front of a large audience of buyers and letting them compete to pay you the highest price is how you maximize value!
How to find royalty buyers in Pennsylvania
We’re all on the same page now about needing to find a large network of buyers and allowing them to compete for your property. Great! So how do I actually do that? In the past, the only way to do it was to visit countless websites and request a bid. You didn’t really know who you were dealing with and it was an extremely time consuming process. Fortunately there is now a much better way to sell royalties in Pennsylvania.
We recommend that you list your property with a reputable company like US Mineral Exchange. Their company is basically the MLS of mineral rights. Once you list the property, royalty buyers from all over the country get notified your property is on the market for sale. Buyers will then come in and try to compete for your property to offer the highest possible price. As we mentioned before, if you want to get the maximum amount for selling royalties in Pennsylvania you need to get your property in front of a huge audience of buyers. This is exactly why we recommend US Mineral Exchange.
Questions about how to Sell Royalties in Pennsylvania?
If you have questions about selling royalties in Pennsylvania, we’re here to help! Drop us a line using the form below and we will gladly answer your questions.