Replies to This Discussion

Permalink Reply by Russell Thurmon on March 18, 2011 at 8:49

Thanks for your response Skip – I really appreciate it.

 

Hopefully you can help me understand this.

 

In 30 calendar days (14 in a pinch) we can:

Run title work (and issue title insurance on said title work)

Have an inspection done on the property

Order and receive an appraisal

Do a social security number and patriot act check (the resulting report is around 30 pages long)

Verify employment on both borrowers

Verify assets including a detailed paper trail on all large deposits

Order and receive tax returns from the IRS

Negotiate and make needed repairs on the property

Have a survey done

And an addition to 6 to 12 other processes dependent on a given property.

And fund the transaction

 

And to the tune of about 500 a day being the 10^th largest lender in the US.

 

Why does it take your industry effectively 7 to 8 weeks (or longer) to run a title search and pay the lease?

 

I think there are additional factors at play here.

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Permalink Reply by ken hatcher on March 18, 2011 at 9:01

It was great to revive this from the archives, just wondering where the leasing is going on now. I'm thinking "The Hawk" in not doing a bunch. I know some folks that would be delighted to see a draft.

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Permalink Reply by Skip Peel - Mineral Consultant on March 18, 2011 at 9:06

First, the are numerous individual titles that make up a production unit and some goodly number may require curative work.  Second, there is a limited number of professionals who perform this kind of work and operators do not wish to use any except those with whom the have a working relationship.  In other words, they have proved themselves proficient.  Third, the Haynesville Shale is an unusual play in that it is so continuously productive over a large aerial extent.  This causes a rush to drill and HBP prospective leasehold.  A lot of wells in a relatively short time frame.  The professionals who perform the title review are inundated with work.  Much of the time involved in the period to complete title is simply getting to it.  The queue is long.

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Permalink Reply by Russell Thurmon on March 18, 2011 at 9:14

I can understand two to four weeks but the time frames are excessive and what it effectively does is gives you an executed and valid lease while the landowner’s payment is in escrow for close to 2 months (or more).  This seems deliberate as your industry is the only one that still uses this archaic instrument and you gain benefit for 2 months prior to the landowner. I can’t imagine a seller allowing a buyer to move in before the property is closed and the seller paid.  

 

I mentioned in my post we close 500 transactions a day.  I’d say any reasonable person could construe we’re quite busy as well and not twiddling our thumbs either – but we seem to get it done in a timely manner 500 times a day.

 

We run title plus all the items mentioned.

 

What would make much more sense is to put the total transaction in escrow with a specific calendar day timeline.  Or even issue a cashiers check at the end of a specific and given time frame instead of I’ll pay when I feel like it after 6 weeks (or more) after your bank mails a bank draft to my bank that I’ll then cancel and issue a cashiers check for (when and if I feel like it).

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Permalink Reply by Skip Peel - Mineral Consultant on March 18, 2011 at 10:39

Russell, we are talking about different situations.  When you say run title, I'm thinking full title opinion for a Division Order.  You seem to be discussing title review as it pertains to a draft for bonus on a newly executed lease.  If that's the case, my apologies for missing it.  As I do not work for the industry, you'll have to find someone else to explain the particulars of your question.

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Permalink Reply by Russell Thurmon on March 18, 2011 at 11:20

I am Skip

 

I just can't make sense of the draft thing - I've been in the banking industry in one form or another for over 25 years (the real estate end for 15). I was told it was to give time to run title but it's just not adding up.

 

 

Permalink Reply by The_Baron on March 21, 2011 at 4:06

Russell,

 

Running mineral title is far more complicated than real estate title. This is especially true outside of LA  where we don't have the benifits of prescription. Couple that together with poor records and closed up abstract plants and crowded courthouses there can be a tough road ahead. Also, you have to keep in mind that the landmen may have quite of few tracts to run.

 

Personally, I think a 60 day draft is extreme, but not unheard of. Keep in mind that the terms of the draft are negociatable.

Permalink Reply by Russell Thurmon on March 24, 2011 at 4:34

Baron 30 business days is in effect around 60 calendar days the way it's set up. As the time frame doesn’t start until the issuing bank physically receives the draft back from the depositing bank and then the draft is canceled after the given time frame elapses and a cashiers check is cut and mailed back to the presenting bank (at least in my case).

Thirty days (calendar) is probably not extreme (it could be done faster) but 60 is no question excessive, especially when the other party has an executed lease in hand. As mentioned escrow makes much more sense, and as I researched the use of the draft In the oil and gas industry I learned that was the original intent. Both the lease and draft were presented to the depositing bank and the lease was not released until funds were deposited. The oil and gas industry has moved away from this and is requesting the executed lease up front now.

Permalink Reply by Two Dogs, Pirate on March 18, 2011 at 13:25

Russell just because you have been in the banking biz for 25 years does not make an expert in land title. Have you ever run title and to what extent? Have you ever run the names S.B. Evans or Nabors Properties in Desoto and Sabine Parishes? Mineral title is completly different than mortgage title. These people that run mineral title get paid  more than your general folks that run surface title but if you want a quick answer then go to your abstractor and ask if they had run mineral title.

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Permalink Reply by Russell Thurmon on March 24, 2011 at 4:37

I did - they said it could be done in one to two weeks

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