Appraisers' Free Forum

I am doing a house in the rural areas of Salina on 14 acres. The owners told me they have mineral rights. What do I need to know about using that (or not) in my appraisal?

We don't come across that very often here as most mineral rights do NOT change hands with the deed.

Thanks for your help.

The only adjustment I can find here is if somebody is actively trying to lease or buy the minerals due some discovery and intent to mine a lode of something.

Some mineral deeds are for specific minerals ... some are for ALL minerals ..... and the deeds do expire ... some are good for 100 years and some for other periods .... the goal would be to find other sold properties that sold WITH their mineral rights in tact and see if there was any significant difference in the selling price that could be attributed to those rights .... it might also be time to talk to local realtors and maybe even assessors to see if mineral rights enter into the market place when it comes to value .... In my market, mineral rights show some minor influences ... even with the zinc and limestone operations nearby .. ag lime is a commodity and sometimes a byproduct of zinc mining, but the affect on market values is minimal ...

I would guess that asking Terell is your best bet, particularly since he is so close to your market area .....

Yep, you are right. Actually, Terry works around Salina as well so he should know, as well as our friend John Wilkerson.

I just wanted to post an intelligent post for a change

I really don't know... am writing this primarily so I'll be notified and can see the response when Terrel answers. I don't believe I have ever seen a deed that specifically conferred mineral rights. In Joplin a lot of deeds specifically exclude mineral rights, but since mining here ended prior to 1950 I pretty much assume that it doesn't make much difference.

Of course, the pat answer is that as long as I am comping them to ones that also don't have mineral rights, it would not matter. But, I'm not sure what you would do if it was the other way around.

We had one interesting company here that insisted to take title to "surface rights only." Not really sure why, though. Since I did not appraise it or ever use it for a comp I really didn't need to find out.

You're appraising the real estate - would the current owner sell the mineral rights with the real estate? (Not LIKELY - most hold on to them forever or until they're offered the "right price" [hmmmmmmmmmmm - wonder when my relatives will do that or pass it on to me ]). Just a thought. Not to mention the fact that YOU may not be qualified to appraise mineral rights.

Otis wrote:You're appraising the real estate - would the current owner sell the mineral rights with the real estate? (Not LIKELY - most hold on to them forever or until they're offered the "right price" [hmmmmmmmmmmm - wonder when my relatives will do that or pass it on to me ]). Just a thought. Not to mention the fact that YOU may not be qualified to appraise mineral rights.

1. The current owners bought the real estate WITH the mineral rights, so that dog don't always hunt :)

2. I am aware that I probably am not qualified to appraise mineral rights, hence my question addressed at Terrel and other CGAs who have experience with that.

Otis wrote: Just a thought. Not to mention the fact that YOU may not be qualified to appraise mineral rights.

Not much of a thought.

Of course she is legally able to appraise this property. As a Certified Residential Appraiser the rules state she can do "Any transaction value up to $250,000 and 1-4 residential units without regard to transaction value or complexity." As a competent appraiser she is doing what is necessary to learn the effects of mineral rights and how they affect the property. To me this is an indication of professionalism. That you may not have the self confidence to make a public attempt to learn is irrelevant in her case.

Annemieke Roell wrote:

Otis wrote:You're appraising the real estate - would the current owner sell the mineral rights with the real estate? (Not LIKELY - most hold on to them forever or until they're offered the "right price" [hmmmmmmmmmmm - wonder when my relatives will do that or pass it on to me ]). Just a thought. Not to mention the fact that YOU may not be qualified to appraise mineral rights.

1. The current owners bought the real estate WITH the mineral rights, so that dog don't always hunt :)

2. I am aware that I probably am not qualified to appraise mineral rights, hence my question addressed at Terrel and other CGAs who have experience with that.

Butttttttttttttttt - what is your SOW? Appraise the real estate or the whole damned thing?

They contacted you as a real estate appraiser (most likely) so that, IMNSHO, is what you should be looking at. If after a further conversation (clarification of the SOW) you find out that this is too ALSO include the "mineral rights" then the iniitial fee is too low and you then need to find what someone (Terrel) would charge for a consultation fee and/or assistance. There is, in my inexperienced position of those aspects, a lot more into appraising that/those aspect/s than just the "fee simple rights of real estate".

Just a thought. (Especially with GP being the investigator)

Err, Otis...
Mineral rights are a part of fee simple unless otherwise specified. So are surface rights, air rights, etc.

You begin with the whole enchilada, then exclude what does not apply. If your SOW is to appraise the market value of the fee simple interest, you just included mineral, air, surface, water, and all other rights unless you specifically exclude them.

One other observation: You do not have to BE competent in order to accept an assignment; you have to BECOME competent, state that you were not competent, then tell how you became competent.

Jim Plante wrote:Err, Otis...
Mineral rights are a part of fee simple unless otherwise specified. So are surface rights, air rights, etc.

You begin with the whole enchilada, then exclude what does not apply. If your SOW is to appraise the market value of the fee simple interest, you just included mineral, air, surface, water, and all other rights unless you specifically exclude them.

One other observation: You do not have to BE competent in order to accept an assignment; you have to BECOME competent, state that you were not competent, then tell how you became competent.

Do you also have to inform the client and tell them what you are doing and then again get their approval to continue?

Bill, the client should be told up front. "I've never had to separate the mineral rights from the rest of the property before, so I'll have to read up on it and consult with some appraisers who have experience in doing that. Or, if you prefer, I can put you in touch with one of those appraisers. Do you want me to do the appraisal, or would you like some phone numbers."

If s/he says to go ahead, then make sure you detail that agreement in the engagement letter.

Otis wrote:

Annemieke Roell wrote:

Otis wrote:You're appraising the real estate - would the current owner sell the mineral rights with the real estate? (Not LIKELY - most hold on to them forever or until they're offered the "right price" [hmmmmmmmmmmm - wonder when my relatives will do that or pass it on to me ]). Just a thought. Not to mention the fact that YOU may not be qualified to appraise mineral rights.

1. The current owners bought the real estate WITH the mineral rights, so that dog don't always hunt :)

2. I am aware that I probably am not qualified to appraise mineral rights, hence my question addressed at Terrel and other CGAs who have experience with that.

Butttttttttttttttt - what is your SOW? Appraise the real estate or the whole damned thing?

They contacted you as a real estate appraiser (most likely) so that, IMNSHO, is what you should be looking at. If after a further conversation (clarification of the SOW) you find out that this is too ALSO include the "mineral rights" then the iniitial fee is too low and you then need to find what someone (Terrel) would charge for a consultation fee and/or assistance. There is, in my inexperienced position of those aspects, a lot more into appraising that/those aspect/s than just the "fee simple rights of real estate".

Just a thought. (Especially with GP being the investigator)

Otis, your whole post needs to be edited. It is an example of a hang over from the dark side where help was hard to come by and boiler plate, knee-jerk comments made without thought or accountability was not. Fix this crap. You could have just told Annemieke you didn't know anything about mineral rights and quit right there. Let us abandon forever the habit of lecturing one another on competence and finding mentors except as a last resort. The absence of that is large attraction here.

Somebody go get Ter in here. That should end it so long as he doesn't go off on the value of saving the planet. Mothing wrong withsaving the planet, but we have enough problems in appraising without appraising that too.

Jim Plante wrote:Err, Otis...
Mineral rights are a part of fee simple unless otherwise specified. So are surface rights, air rights, etc.

You begin with the whole enchilada, then exclude what does not apply. If your SOW is to appraise the market value of the fee simple interest, you just included mineral, air, surface, water, and all other rights unless you specifically exclude them.

True - I should have clarified it. It is part of the whole bundle. But here, mineral rights are specifically excluded on title policies, purchase agreements, etc. All the mineral rights were bought up years (close to centuries) ago or are owned by the state. My fault on not being clear.

And... I would add, Otis (although I may later be proven wrong) that in an area like mine where mineral rights rarely transfer, it really does not matter as long as you are comparing one fee simple to another similar fee simple. Is that too siimple?