These days almost everyone is looking at is the “bonus money” when they negotiate a lease. “How much did you get?” has become a common point for discussion. To most people, the other terms of the lease go out the window when an amount offered for a lease per acre exceeds what many people remember the fee simple value of real estate was a few years ago.
It isn’t about getting a few dollars to sign a lease, heavily worded to favor the gas company, it’s what the terms of the lease are and what comes next. In the bigger picture, getting a ”bonus money” check, may not be all it is cracked up to be. Read on.
Having spoken with several in the real estate community, the following was the general consensus. If you intend to sell your land during the time of this lease, be prepared to wait longer than a property which was not leased. Why? The buyers who are still looking are making it very clear that they want nothing to do with these leases. Who are the buyers? Since the subprime mortgage problem has hit, it seems that the ones who need that type of financing are no longer around. Or if they are, they are few and far between. Credit scores, according to different mortgage brokers need to be higher. Nothing down is out, 5% down is rare.
So, who are the buyers? For the most part, not the locals, unless they are investors. The current buyers are ones who are generally not from this area and are paying cash. One realty agent shared the story of a buyer who called inquiring about larger parcels of available land - 50 through 500 acres for sale in the county. He stated he was a cash buyer. would close quickly and that he wanted to buy it to lease it then dump it on the market through the realty company, of course retaining the “bonus money”. It was stated that while this is not the norm, it is not entirely unusual either. Nice. All we are thought of to these bottom feeders is as a place to buy up our cheap (relatively speaking) land, grab what money is there from a lease dump it and walk away. If you have a problem with people coming here who don’t share the locals’ values - such as they are (quarries and lots of junk around notwithstanding), then you will really love this latest crop. They don’t want to live here, they only want to grab what they can and stay away from this Godforsaken patch we call home. Thus, it becomes an economic decision to them. They don’t have to live here, they won’t be inconvenienced by the construction or any of it afterwards. Just make a quick buck and get out. Again, this isn’t the majority of the buyers, but a significant disturbing minority. Other buyers are ones who just want to buy property and be left alone. They don’t need the “bonus money” and they don’t need the hassle.
After the leases are signed, who is going to purchase your property? No really, think about it. Why would someone who truly wants to live here, want to be saddled with the uncertainty of what could happen on or around their property? One of the great advantages to living here is the lack of disturbance of the land. It certainly was a significant motivating factor for the many of the neighbors I know who have chosen to locate here.
Here is a prediction. In the short term and possibly mid term, the value of a property with a signed lease may have been reduced by a similar amount of the “bonus money”. Sure these landmen will tell you that you can sell your property with a lease. Legally, this is correct. In the real world however, buyers for a property with a lease which obligates the owner to allow these companies to do many things to and on the property that will shatter their peace and quiet, are few and far between.
If you don’t intend to sell in the near future, then this may not be a problem. However many of us who live here, don’t know what catastrophe (death, divorce, having to bail out of the area), may befall us and when. Will we be able to sell our land if we have a lease? The real answer to that question may take years to realize.
This writer was just made aware of an article in this week’s River Reporter from Narrowsburg, NY. The link is here:
http://www.riverreporter.com/issues/08-04-10/head1-drilling.html
As well as another on water concerns:
http://www.riverreporter.com/issues/08-03-06/head3-gas.html
Using diesel fuel to aid in the fracing process? I hope someone is paying attention…
To find more stories there, go to the archives section on the left side of the riverreporter page.
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[...] Concerned Taxpayer has a reputation for providing reliable and awe-inspiring information. Check out the latest post on Gas Muse 4/15/2008 that may be of interest. Below summarizes what was written: [...]
Speaking of peace and quiet. There are many acres of state lands in Susquehanna County. Is it possible for some money grubbing politician to see gas lease cash in these sate lands? Are they allowed by law to lease out these lands? New York a few years ago leased out logging on sate lands in the Windsor area just across the border from Susquehanna County.
There are at least 14 to 15,000 acres of gamelands in Susquehanna County. Other websites indicate as much as 29% royalty. So what are the politicians going to do with the money? One would hope it would be used to purchase or maintain additional state lands, the cynic says it will go to some pork project. Of course, there is no money with no drilling, unless there was “bonus money”.