I often receive calls from individuals who have been approached by “lease brokers”. I am generally skeptical about their ability to “market” a property for a lease. Unlike selling typical real estate, it is my belief that there is little a broker can do to drum up interest in minerals. Companies interested in your land have an uncanny ability to find owners. Also, I am suspicious about the commission structure. I have not seen a broker agreement, but from conversations I understand that they receive a commission of 10%. I’m not sure if this is for the lease bonus or bonus plus royalty. If bonus only, they would encourage a high bonus/low royalty. If both, they continue to receive a share of royalties.
I am posting here to see if my view is shared by others or if there is legitimate value in their services that I have not recognized.
Don’t want to speak for any group of professionals who call themselves “lease brokers” but I am an independent landman who has helped owners in both leasing and selling efforts of their interests. I can only speak as to my way of work and experience in doing this but it is not generally difficult to “market” a property for lease. Studying and understanding the area of interests, knowing who is more active/aggressive in those areas and simply reaching out to gauge interests of production companies is a fairly easy process. Yes, companies interested in property do have an uncanny ability to find owners, but only if that property is in their immediate priority area at that time. Testing the market for your ownership doesn’t require the owner to wait for something to happen.
As far as commission structure goes, I can say that the only places that I have seen 10% are with online, large scale marketing companies, but agreements can be structured many different ways. Again, I can only speak from personal experience but commissions are usually paid in the 3-5% range, which comes out of the total bonus amount paid if leasing. I’m not sure why anyone would encourage a high bonus/low royalty when helping an owner, as it should be the ultimate goal of anyone in such a position to get the very best deal possible for those they represent. I also haven’t run into any situation where I have heard of anyone trying to take a commission of the bonus and also write themselves into an override of royalty of the lease as well. Most times when someone like myself works on behalf of an owner in this capacity the commission is to cover work and research done throughout the process instead of billing a day rate of $400-$500/day. Which goes a long way in comparison to hourly attorney fees.