Buyer Tactics: Bank Drafts

If you own minerals, chances are you’ve received a bank draft. It’s usually attached to the bottom of a letter and looks like a check. But it’s actually a contract. When you deposit it, you’re obligated to sell your minerals… but they’re not necessarily obligated to buy! They still get to run title and do their diligence, and that money is usually tied up until then. In other words, behaves like any other purchase and sale agreement.

Of course, some landowners prefer that. But in our experience, the fine-print on bank drafts tends to be pretty one-sided in favor of the purchaser. Moreover, many landowners don’t understand what they’re getting into. They want fast cash and assume that the “check” they’re cashing will get them that. Then they’re rudely surprised to learn that the money doesn’t clear until weeks or months later. That’s why Caddo Minerals doesn’t use bank drafts. We prefer clear purchase and sale agreements written in 12-point font, not the tiny fine-print attached a bank draft.

To protect yourself, we recommend landowners don’t sign bank drafts. If a company is reputable and making a strong offer, they should be willing to send over a regular purchase and sale agreement.