Mineral Rights On New Construction

[Flakey]

I recently completed an appraisal for new construction by Dr. Horton. 2,600 sf box on a 9,400 sf lot. I almost never do anything on new homes by this builder. I don't work for their lenders. I just received a stip stating "Mineral rights did not transfer with the property. Appraiser to state if this affects the appraisal report. Appraiser needs to comment on the effects of mineral rights not transferring."

This was accompanied by copy of a Mineral Deed dated May 1 (my effective date is May 5). Maybe I live in a sheltered world, but I have not run into this before on a new home, on a tiny lot, in a cookie cutter restricted subdivision. I usually address this in my engagement letter on acreage or homes with larger tracts by stating I am appraising surface rights only and expert advice should be sought regarding any other rights and reiterate that in the report.

My initial reaction is this is way outside the scope of work and was not part of the original assignment conditions. I'm not comfortable just saying no problem just because all my sales (except one) and competing listing are in the same subdivision. I don't know enough about this stuff to know what I don't know in terms of potential pitfalls and liability.

Anybody had a similar experience and how did you handle it?

 

[Terrel L. Shields]

In South Carolina?
Zero O & G production?
Zero impact.
https://cwfnc.org/documents/DR-Horton-Returns-Mineral-Rights.pdf

 

[glenn walker]

No impact if there was oil-gas-gold DR Horton would bring in some jacks and forget building Mc-Mansions : ) LOL

 

[Pittsburgh Pete]

No impact if there was oil-gas-gold DR Horton would bring in some jacks and forget building Mc-Mansions : ) LOL

Not so--fracking can access oil and gas under a property from a mile away or more with horizontal drilling technique. That said, not sure if fracking is common in SC. Stip might be coming from someone in a place where it is an actual consideration.

BTW, in PA oil and gas are different than mineral rights based on a court decision several years back.

 

[Howard Klahr]

This was accompanied by copy of a Mineral Deed dated May 1 (my effective date is May 5).

I am appraising surface rights only

Isn't that what you effectively did? Were your comps located in the same development? With the same restriction?

 

[Flakey]

Isn't that what you effectively did? Were your comps located in the same development? With the same restriction?

Yes, I am aware, effectively, that I am usually appraising surface rights. It's just never been an issue here. All of my comps but one are located in the same development subject to the same restrictions. Basically, there is zero mining or drilling of anything within at least 100 miles of this area. That's why it took me by surprise. It just took me a little while to develop the proper verbiage to disclose and disclaim. If I needed that skill set, I would have had it a long time ago.

 

[Pittsburgh Pete]

Yes, I am aware, effectively, that I am usually appraising surface rights. It's just never been an issue here. All of my comps but one are located in the same development subject to the same restrictions. Basically, there is zero mining or drilling of anything within at least 100 miles of this area. That's why it took me by surprise. It just took me a little while to develop the proper verbiage to disclose and disclaim. If I needed that skill set, I would have had it a long time ago.

Based on the article that Terrell posted, it would appear that the buyers did get the mineral rights. The question now would be whether there is any value in the rights. Also based on the article it appears that your other sales may or may not have had the mineral rights when they purchased but now apparently, due to the beneficence of Dr. Horton, they now own them.

 

[Flakey]

I don't think so. I read the article but it may have been in NC only. The deed I have was recorded 4 days prior to the effective date of my appraisal (05/05/2018). I get the impression Horton will relent only when forced to do so? How much can they sell mineral rights for when there is, apparently, nothing there?

 

[Pittsburgh Pete]

Quick internet search reveals numerous articles concerning South Carolina and fracking, including the following:

http://www.drillingmaps.com/South-Carolina.html#.WwXf-Ugvy1s

 

[Terrel L. Shields]

https://ballotpedia.org/Oil_and_gas_production_in_South_Carolina

There is no oil or gas activity in South Carolina due to limited crude oil and natural gas reserves.
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Don Horton was a Texas developer who routinely kept mineral rights which are quite valuable in Texas. I believe there that certain rules required developers to set aside lots for potential production if minerals were severed. It would be pointless to keep minerals outside petroleum states. But go to your clerks office and search "mineral deed" and if you find any, if there are no deed stamp requirements, call the seller and just ask what they got.

ps- fee simple includes mineral rights, air rights, hunting rights, etc. So if you checked off the fee simple box.... Just saying minerals are part of the bundle of rights.