House Poor Defined (CFFL 544)
Transcript:
Jack Butala: Jack Butala with Jill DeWit.
Jill DeWit: Hi there.
Jack Butala: Welcome to our show today. In this episode, Jill and I talk about House Poor Defined. Before we get into it, let's take a question posted by one of our members on the landinvestors.com online community. It's free.
Jill DeWit: Okay. Allan asks, "Hi. I purchased a parcel of land and now have a potential buyer who is asking if mineral rights are included. Has anyone had this question come up, and if so, how would I even go about answering what seems to be a very complex area of law?" I apologize. This is Marianne, by the way. "Does anyone make this part of their due diligence before buying a property, and if so how are you checking it? Any help is much appreciated." I want to just point out, Marianne is actually what looks like brand new to Land Investors and just kind of learning about this, but it's a really good question.
Jack Butala: Yeah. Do you want me to answer it or do you want to?
Jill DeWit: Yeah. Go right ahead.
Jack Butala: You're 100% correct in saying it's extremely complicated. Here's what happens. There's a change of title on every single piece of property right back to when it was homesteaded. So let's say it changed hand just 10 times. John Smith gave it to his daughter or Sally Smith. Sally Smith sold it to an unrelated third party called John Adams, and so on and so on and so on. Well, during one of those changes, one of those transfers, somebody put right on the document on the deed, the transfer document that they're going to retain the mineral rights. They're going to transfer the surface rights, but they're going to keep the mineral rights.
Is it complicated and difficult and nearly impossible to find out who actually owns mineral rights? Yes it is. Unless you have to go through all those documents, most of which, think about how many county buildings have burned down before the internet. The chances are of really digging into and finding out who owns mineral rights is nearly impossible at our level. If there's a gold mine on a piece of property somewhere in Nevada and there's billions of dollars in potential revenue involved, then you can start to hire people and figure that out. But for purposes of these asset types that we're involved in, it's nearly impossible, so what do you do?
Well, what Jill and I do and for a lot of years what we just said is ... We don't even look into it. We just say no. We are not transferring the mineral rights. Or we say I don't know. We're not going to put it in our document.
Jill DeWit: Right.
Jack Butala: When we convey the property to you, we're going to convey the property as if we don't know and that you get the mineral rights with it. We're not going to retain the mineral rights nine times out of 10, well, 9.9 times out of 10. The potential buyer that's asking that doesn't know this and quite frankly, it's really important for you to understand the basic stuff, but if you start to go down this path, this philosophical mineral rights path with the buyer, you're going to scare him away.
So just say to your knowledge, I believe that we are transferring the mineral rights to you, but I don't know. You're going to have to check, but I think it does come with mineral rights, and we're going to assume that, so we're going to convey a document like we believe that you're going to get the mineral rights with it.
Jill DeWit: Right. I would just say too, look at it like the property. The property's the asset. That's what I'm conveying to you-
Jack Butala: Yeah. There you go, Jill.
Jill DeWit: That's really it is.