Sell a Land Note With Mineral Rights in Texas — Key Considerations

Texas and mineral rights have a relationship that stretches back more than a century, and if you hold a promissory note on land where mineral rights are part of the equation, you are dealing with one of the more complex but potentially rewarding types of land notes in the secondary market. The intersection of surface land ownership, mineral rights ownership, and a seller-financed promissory note creates a transaction that requires careful analysis by both the note seller and the note buyer, and understanding how these pieces fit together is essential to getting a fair price for your note. Whether the minerals were conveyed with the land, reserved by the original owner, or split among multiple parties, the mineral rights status of your collateral property will be a key consideration when you decide to sell a land note with mineral rights in Texas.

Mineral rights in Texas can include oil, natural gas, coal, uranium, sulfur, and other subsurface resources, and their value can range from negligible to enormous depending on the location and geology of the property. In some parts of the state — particularly the Permian Basin, the Eagle Ford Shale, the Barnett Shale, and the Haynesville Shale — active mineral production can make the land exponentially more valuable than its surface use alone would suggest. In other areas, the minerals may have little current commercial value but represent a speculative asset that could appreciate if future exploration proves productive. For note holders, the critical question is how the mineral rights situation affects what a buyer will pay for the promissory note, and that is exactly what this guide will address.

This comprehensive guide will explain how mineral rights interact with land notes in Texas, what note buyers look for when mineral rights are involved, how different mineral rights scenarios affect pricing, and what steps you should take to prepare your note for sale. By the time you finish reading, you will have a thorough understanding of how to navigate the complexities of selling a land note with mineral rights in Texas and how to position your note for the best possible offer.

Understanding Mineral Rights in the Context of Texas Land Notes

The Severance of Surface and Mineral Estates in Texas

Texas law allows the ownership of land to be divided into separate estates — the surface estate and the mineral estate. This concept, known as severance, means that the person who owns the surface of the land does not necessarily own the minerals beneath it, and vice versa. Severance typically occurs when a landowner sells or conveys the surface rights while reserving the mineral rights, or when a landowner conveys the mineral rights while retaining the surface. Over generations of land transactions in Texas, mineral rights have been divided, subdivided, and transferred so many times that it is not uncommon for a single tract of land to have dozens of mineral interest owners who have no connection to the current surface owner.

For note holders, the key question is what mineral rights, if any, were included in the transaction that created the note. When you sold the land on seller financing, did the buyer receive all of the mineral rights, a portion of the mineral rights, or none at all? The answer to this question is found in the deed that conveyed the property to the borrower — specifically in the granting clause and any reservation language. If the deed included a mineral reservation, then the borrower owns only the surface estate, and the minerals remain with whoever reserved them. If the deed made no mineral reservation, then the borrower presumably received whatever mineral interest the seller owned at the time of conveyance, which could range from a full mineral estate to a fractional interest or even nothing at all if the minerals had been previously severed.

How Mineral Rights Affect the Collateral Securing Your Note

The relationship between mineral rights and your promissory note's collateral value depends entirely on what the borrower owns. If the borrower received the full mineral estate along with the surface, then the collateral securing your note includes both surface and mineral value, which can be a significant positive factor in pricing. If the minerals were reserved by you or a prior owner and the borrower owns only the surface, then the collateral is limited to the surface value, and the mineral rights are essentially irrelevant to the note sale. If the borrower received a fractional mineral interest, the collateral includes the surface value plus whatever that fractional mineral interest is worth.

Note buyers care about this distinction because it affects the total value of the collateral that secures their investment. A 100-acre tract in the Permian Basin with a full mineral estate might be worth significantly more than the same tract with no mineral rights, and the difference in collateral value directly affects how much a buyer will pay for the note. Conversely, in areas with no known mineral potential, the presence or absence of mineral rights may have minimal impact on the note's pricing because the minerals have negligible current value. Understanding which scenario applies to your specific note is the first step in setting realistic expectations for your sale.

Active Production Versus Speculative Mineral Value

There is an important distinction between mineral rights that are currently generating income through active production and mineral rights that represent only speculative future value. If the property securing your note has producing oil or gas wells, or if there is an active mineral lease generating royalty payments, the mineral estate has quantifiable current value that a note buyer can factor into their collateral analysis. This is generally a positive factor because producing minerals add a verifiable income stream and a demonstrated asset value to the collateral package.

On the other hand, if the property is in an area with known mineral potential but no current production or leasing activity, the mineral value is speculative. Note buyers tend to be conservative when it comes to speculative mineral value — they will acknowledge its existence but will typically not assign significant weight to it in their pricing analysis. This is because the buyer is evaluating the collateral based on what it could be sold for today in a liquidation scenario, and speculative mineral rights do not add much to the immediate resale value of the surface property. For a broader understanding of how collateral values affect note pricing, you can read about what determines the value of a note in Texas.

Scenarios That Affect Pricing When Mineral Rights Are Involved

Scenario One — Borrower Owns Full Mineral Estate With No Active Production

In this scenario, the borrower received the complete mineral estate when they purchased the property from you on seller financing, but there is no current mineral production or active leasing on the property. This is perhaps the most common situation for land notes in areas outside the major producing basins. From a pricing perspective, the note buyer will evaluate the collateral primarily based on the surface value of the property, with the mineral ownership providing a modest uplift. The buyer knows that the full mineral estate makes the property more attractive to potential purchasers in a resale scenario, which reduces their liquidation risk, but they are unlikely to assign a specific dollar value to unproven minerals.

The good news for note sellers in this scenario is that the full mineral estate is a clear positive that differentiates your collateral from a surface-only property. Even without active production, the possibility of future mineral development has real value in the Texas market, particularly in areas where geological formations suggest potential for oil, gas, or other mineral resources. Buyers will view this scenario favorably compared to a note where the minerals have been severed and the borrower owns only the surface.

Scenario Two — Borrower Owns Full Mineral Estate With Active Production

If the property securing your note has active mineral production — whether from a well on the property itself or from a pooled unit that includes the property — the collateral value may be substantially higher than the surface value alone. Active production means the borrower is receiving royalty payments, and those royalty payments represent a quantifiable income stream that adds value to the property. Note buyers will want to see documentation of the mineral lease, the royalty payment history, and any production data that is available.

This scenario typically results in very favorable note pricing because the buyer is acquiring a lien on a property that has both strong surface value and a demonstrated revenue-generating mineral estate. The combined collateral value creates a larger equity cushion, which reduces the buyer's risk and allows them to offer a smaller discount. However, it is worth noting that some note buyers may also consider the environmental and regulatory risks associated with active mineral production, such as the potential for surface damage, liability for well maintenance, or regulatory changes that could affect production levels. These considerations are generally minor for conventional oil and gas operations on private land in Texas but are part of the buyer's due diligence nonetheless.

Scenario Three — Minerals Were Reserved and Borrower Owns Only Surface

If you reserved the mineral rights when you sold the property to the borrower, or if the minerals were previously severed by a prior owner, then the borrower owns only the surface estate. In this case, the mineral rights are not part of the collateral securing your note, and the note buyer will evaluate the collateral solely based on the surface value. This is a straightforward situation from a pricing perspective because the buyer does not need to analyze the mineral estate at all.

However, mineral reservations can still affect the note's value indirectly. Under the dominant mineral estate doctrine in Texas, the owner of the mineral rights has the implied right to use as much of the surface as is reasonably necessary to access and produce the minerals. This means that if someone other than the borrower owns the minerals and decides to develop them, the borrower's use and enjoyment of the surface property could be affected. Note buyers are aware of this dynamic and may factor it into their collateral analysis, particularly if the property is in an active drilling area where surface disruption from mineral development is a realistic possibility. The impact on pricing is usually modest, but it is something that an experienced buyer will consider.

Scenario Four — Fractional or Divided Mineral Interests

Texas has a long history of mineral rights being divided among multiple parties through inheritance, sales, and conveyances. It is not unusual for a property's mineral estate to be owned by dozens or even hundreds of different parties, each holding a small fractional interest. If your borrower owns a fractional mineral interest, the value of that interest depends on its size, whether there is active production, and the practical challenges of managing a divided mineral estate.

Note buyers generally view fractional mineral interests with less enthusiasm than full mineral ownership because the economic value of a small fractional interest is limited and the legal complexity of dealing with a divided mineral estate can create complications. That said, a fractional interest is still better than no mineral interest at all, and in areas with active production, even a small royalty interest can add meaningful value to the collateral. The key for note sellers in this scenario is to provide clear documentation of exactly what mineral interest the borrower owns so the buyer can evaluate it appropriately.

Documents and Due Diligence for Notes With Mineral Rights

Essential Documents for Any Land Note Sale

The standard documentation requirements for selling a land note apply regardless of the mineral rights situation. You will need the original promissory note, the deed of trust or contract for deed that secures the note against the property, a current payment history, and any title insurance policy that was issued at origination. These documents form the foundation of the buyer's analysis and should be organized and ready to share when you request a quote. For a complete checklist of required and helpful documents, review this guide on documents needed to sell a land note in Texas.

In addition to these core documents, you should also have a copy of the deed that conveyed the property to the borrower. This document is critical because it contains the specific language regarding mineral rights — whether they were conveyed in full, conveyed in part, or reserved. The buyer's attorney will review this language carefully to determine exactly what the borrower owns and, by extension, what is included in the collateral securing the note.

Additional Documentation When Minerals Are Part of the Picture

When mineral rights are involved, several additional documents can help the buyer evaluate your note more accurately and potentially support a better offer. If the property has an active mineral lease, provide a copy of the lease along with any amendments or extensions. If the borrower is receiving royalty payments, a history of those payments — which can usually be obtained from the operator or from the Texas Comptroller's office — is extremely helpful. If a mineral title opinion or abstract has been prepared for the property, that document can save the buyer significant time and money during due diligence.

A survey showing the surface boundaries is helpful for any land note sale but is particularly important when mineral rights are involved because the survey helps the buyer understand the property's relationship to any producing wells, pipeline easements, or drilling units in the area. If the property is part of a pooled or unitized drilling unit, documentation of the pooling order or unit agreement will help the buyer understand the borrower's proportionate share of production. The more information you can provide upfront, the faster and smoother the due diligence process will be, and the more confident the buyer will be in their offer.

Title Considerations Specific to Mineral Rights

Title work for properties with mineral rights is more complex than for surface-only properties because the title examiner must trace the ownership history of both the surface estate and the mineral estate. In areas with a long history of mineral development, the chain of title for the mineral estate can be extensive and may involve dozens of conveyances, reservations, and assignments spanning more than a century. This additional complexity can extend the due diligence timeline by a week or more compared to a straightforward surface-only transaction.

The note buyer will typically order a title search or title commitment that covers both the surface and mineral estates. If the title search reveals title defects in the mineral estate — such as missing conveyances, conflicting claims, or unclear reservation language — these issues may need to be resolved before the sale can close. In some cases, the buyer may choose to proceed with the purchase based solely on the surface value if the mineral title issues are too complex to resolve efficiently. As the note seller, you should be prepared for the possibility that mineral title complications could add time to the process, particularly for properties in older oil and gas producing regions where the mineral ownership history is especially convoluted.

Maximizing Your Offer When Selling a Land Note With Mineral Rights in Texas

Clarity Is Your Best Friend

The single most effective thing you can do to maximize your offer is to provide crystal-clear information about the mineral rights situation from the very beginning. If you know exactly what mineral interest the borrower owns, share that information upfront. If there is active production, provide whatever production and royalty data you have access to. If the minerals were reserved, say so clearly. Ambiguity about mineral rights creates uncertainty for the buyer, and uncertainty always leads to more conservative pricing. By removing that uncertainty, you allow the buyer to price your note with confidence, which typically results in a better offer.

If you are unsure about the mineral rights status of the property, that is understandable — mineral ownership in Texas can be confusing even for experienced real estate professionals. In that case, you can either research the issue yourself by reviewing the deed and checking with the county clerk's office, or you can let the buyer know that the mineral rights status is uncertain and allow them to investigate during due diligence. Either approach works, but the more information you can provide upfront, the more accurate the initial quote will be.

Choose a Buyer With Mineral Rights Experience

Selling a land note with mineral rights in Texas is not something you want to entrust to a buyer who has never dealt with mineral estates before. The complexities of Texas mineral law, the nuances of mineral valuation, and the additional due diligence requirements all demand a buyer with specific experience in this area. A buyer who does not understand mineral rights may either undervalue your note because they do not know how to account for the mineral estate, or they may get spooked during due diligence when they encounter the normal complexities of mineral title and try to renegotiate your price downward.

Longhorn Note Buyers has been purchasing Texas land notes since 2007 and has handled countless transactions involving mineral rights of all types — from notes on Permian Basin ranches with active production to notes on East Texas timberland with long-severed mineral estates. With over $46 million in Texas notes purchased and a 100% close rate on quoted deals, Longhorn has the experience and expertise to evaluate your note fairly regardless of how complex the mineral rights situation may be. When you work with a buyer who understands Texas mineral rights, you can be confident that your note is being valued accurately and that the closing process will proceed smoothly.

Consider Whether a Full or Partial Sale Best Serves Your Goals

If your note is secured by property with valuable mineral rights, you may want to consider whether a full or partial sale best serves your financial goals. In a full sale, you transfer the entire note to the buyer and receive a lump sum. In a partial sale, you sell a specified number of payments and retain the right to receive the remaining payments after the buyer's purchased payments have been collected. Partial sales can be particularly attractive for notes with mineral rights because they allow you to access some cash now while retaining an interest in a note that may increase in value if mineral development occurs on or near the property in the future. For more details on how partial and full sales compare, read this guide on full versus partial land note sales in Texas.

Ultimately, the right choice depends on your specific financial situation, your confidence in the mineral potential of the property, and how urgently you need the cash. A reputable note buyer will help you evaluate both options and will not pressure you into a full sale if a partial sale better suits your needs.

Ready to Sell Your Note?

If you hold a land note with mineral rights in Texas and you are considering selling, Longhorn Note Buyers is ready to provide you with a fair, no-obligation quote. Whether your note involves a full mineral estate, a fractional interest, active production, or reserved minerals, Longhorn has the expertise to evaluate the situation accurately and make you a competitive offer — typically within 24 hours. With more than $46 million in Texas notes purchased since 2007 and a track record of closing 100% of quoted deals, Longhorn Note Buyers is a buyer you can trust to handle the complexities of mineral rights with professionalism and transparency.

Call Longhorn Note Buyers today at (210) 828-3573 or visit longhornnotebuyers.com to get started. There is no cost and no obligation to find out what your note is worth. Whether you are ready to sell now or simply exploring your options, Longhorn's team is happy to answer your questions and help you make an informed decision about the future of your Texas land note.

Frequently Asked Questions About Selling Land Notes With Mineral Rights in Texas

Do mineral rights make my land note more valuable?

Mineral rights can add value to your land note, but the degree of impact depends on several factors. If the borrower owns the full mineral estate and the property is in an area with active or potential mineral production, the additional collateral value from the minerals can support a better offer from the buyer. If the minerals have been severed and the borrower owns only the surface, the mineral rights are not part of the collateral and will not affect pricing. In areas with no known mineral potential, the presence or absence of mineral rights typically has minimal impact on what a buyer will pay for the note.

What if I reserved the mineral rights when I created the note?

If you reserved the mineral rights when you sold the property and created the note, the borrower owns only the surface estate, and the mineral rights remain yours. In this case, the note buyer will evaluate the collateral based solely on the surface value of the property. Your mineral reservation does not prevent you from selling the note — it simply means the minerals are not part of the package. The buyer may ask questions about the reservation to understand whether mineral development activity could affect the surface property, but the sale can proceed normally regardless.

Will the note buyer also want to buy my mineral rights?

Most note buyers specialize in purchasing promissory notes and are not in the business of buying mineral rights separately. However, some buyers who also invest in minerals might express interest if you have retained a valuable mineral estate and are looking to liquidate it. If you want to sell both your note and your retained mineral rights, you would typically do so as two separate transactions — one for the note and one for the minerals. There are companies that specialize in purchasing mineral rights and royalty interests in Texas, and your note buyer may be able to refer you to one if you are interested.

How does active mineral production affect the note sale process?

Active mineral production generally makes the note sale process slightly more complex but does not create any insurmountable obstacles. The buyer will want to see documentation of the mineral lease, production history, and royalty payments, and the due diligence process may take a bit longer as the buyer verifies the mineral estate ownership and production details. On the positive side, active production adds quantifiable value to the collateral and typically supports a better offer. The key is to provide as much mineral-related documentation as possible upfront to allow the buyer to evaluate the situation thoroughly and efficiently.

Can I sell a land note if the mineral rights ownership is unclear?

Yes, you can sell a land note even if the mineral rights ownership is not perfectly clear, though the situation may require additional due diligence and could affect pricing. If the surface ownership is clear and the note is well-secured by the surface value alone, many buyers will proceed with the purchase and simply exclude the uncertain mineral interest from their collateral valuation. In other cases, the buyer may invest in a mineral title search or title opinion to resolve the ownership question before closing. Working with an experienced buyer who is comfortable navigating mineral title complexities is important in these situations, as a less experienced buyer might walk away from the deal rather than work through the uncertainty.