Despite the COVID-19 pandemic, home sales in Texas broke all kinds of records in 2020 with a 9.5% increase from 2019 sales. Experts agree that there are no signs of stopping the Texas real estate train.
If you’re a homeowner in the Lone Star State, chances are that you have heard about the busy real estate market. You might even be considering jumping aboard that train and cashing in your hard-earned home equity with a refinance.
Or perhaps you might be looking to downsize – or upgrade – your living situation and are leaning towards possibly selling your home.
The strong sales activity and dwindling housing inventory of Texas make it a seller’s market. That means if you’ve ever been thinking about selling or refinancing your home, this would be an excellent time to do it.
But what would it cost you? How much does it cost to sell your home in Texas? How much are closing costs in Texas?
Those are great questions. Keep reading for an in-depth look into the costs involved when selling your home in Texas.
What Are Closing Costs?
Closing costs are any fees due and payable above and beyond the sale price of the home. These include, but are not limited to, escrow, title, notary, and legal fees, as well as taxes and any assessment or surveying fees.
How Much Are Closing Costs?
The national average for closing costs is 5% – 10% of the sales price. A quick, easy estimate of closing costs can be done by multiplying the sales price of your home by .05 or .10.
Example: Home sales price: $150,000 x .05 (5%) = $7,500
Home sales price: $150,000 x .10 (10%) = $15,000
In this example, closing costs are estimated to come in between $7,500 to $15,000.
Closing costs can seem complicated, but with this as your guide, you should be able to make sense of them just fine.
If you want to see what your home might sell for, click here and answer a few quick questions and we’ll send you a free valuation estimate!
Are Closing Costs the Same for Every State?
Each state has its own unique combination of closing costs. It’s always a good idea to understand what that combination is and what each of the costs includes.
What Are Closing Costs in Texas?
That’s not a simple answer. Let’s talk about closing costs in the great state of Texas.
Brokerage Fees
Enlisting the services of a realtor in the sale of a home will add a closing cost of 5% – 6% of the sales price of the home. This is a cost that’s shared by both the buyer and seller and covers each party’s agreement unless otherwise specified in the purchase agreement.
Brokerage fees vary but the average rate for realtors in Texas is 2.5% – 3%. Be sure to pay special attention to this amount before signing any listing agreement with a realtor.
Escrow Fees
The escrow company handling the sale will charge each party a fee for its services. This fee typically comes in at $350 – $600 and is paid by each party as billed by the escrow company.
Escrow fees should include all services performed by the escrow company that are not otherwise billed separately. If you have a question about any of the charges billed by the escrow company, be sure to ask your realtor about them.
Title Search
Speaking of fees charged by the title or escrow company, one for obtaining the most recent title report is another one of them. This fee is usually around $100 – $200 and is split between the two parties.
A title search confirms the home’s current ownership and ownership history and that the property is free from any liens or judgments.
Title Insurance
Title insurance is a mandatory fee that protects buyers from liability for any liens or judgments that may not have shown up during the title search. This ensures that the buyer won’t be saddled with any fees that they weren’t aware of at the time of the purchase.
In Texas, title insurance will cost anywhere from .9% to .6% of the sales price. The higher the price, the lower the percentage.
The Texas Department of Insurance provides a complete table with the up-to-date rate and amounts due for title insurance (as of 2019).
In Texas, the buyer pays for the title insurance endorsements (expanded coverage to fit the specific needs of the property) and the seller pays for the premium.
Municipal Lien Search
Another protection for the buyer, a municipal lien search that looks for any otherwise unrecorded property issues that won’t or didn’t show up in the title search. Examples of things that would show up in this search include, but are not limited to:
- City and County code violations
- State code violations
- Utility service balances (water/sewer/solid waste)
- Open or expired permits
- Unrecorded liens
- Special assessments
This is a cost that’s typically split between the buyer and seller and comes in at around $100 – $200.
Pro-rated Property Taxes
The amount paid for property taxes in a home sale will vary depending on the date of the sale. The current owner will be responsible for property taxes payable for the days up to and including the date of sale and the buyer will have to pay the remainder.
Example: Property tax amount: $1000.00
Date of sale: 8/1/2021
Number of days: 213
1000/365: $2.74 per day
$2.74 x 213 days: $583.62 amount due from seller
$1000 – $583.62: $416.38 amount due from buyer
HOA Estoppel
If the property is part of a homeowner’s association (HOA), an HOA estoppel letter is required. The cost for one of these is typically around $200 – $500.
An HOA estoppel letter certifies:
- The monthly fee payable for that fiscal year
- Current balance for the property
- Any special assessment fees that the buyer will have to pay
- Past dues, fines, or other fees
If there are unpaid dues or fees of any kind, or to enforce violations, the HOA can put a lien on any home included in its association. An HOA Estoppel ensures that the buyer isn’t walking into a hornet’s nest of issues with the HOA.
This cost is typically paid by the seller unless otherwise indicated in the purchase agreement.
HOA Bylaws and Rules
For any property subject to an association, the seller is required to furnish current bylaws and rules, and regulations at the seller’s cost. These have to be ordered from the HOA and will usually come in at a cost of around $200 – $250.
HOA Resale Certificate
This is an official rundown of all fees owed to the HOA for the property. The HOA may or may not include this as part of the package when the Bylaws and Rules are requested.
This is typically paid for by the seller and will cost about $200 – $250, the same as the Bylaws and Rules. If offered by the HOA as a package, the total comes to $400 – $500.
Outstanding Amounts Owed
If there are any amounts due on the property, from outstanding utility bills to unpaid HOA dues, these will be paid by the seller at closing.
Recording Fees
The final deed and associated documents must be officially recorded with the county the property falls under. Recording fees will vary depending on the specific county’s rate but range from $120 – $160.
The buyer pays for the recording fees for the deed and the mortgage, and the seller pays for the recording documents to remove encumbrances from the title, releasing them from future liability.
Loan Origination Charges
This amount is determined by the buyer’s lender and the terms agreed to between those two parties, so it can vary greatly. As you probably suspected, this is a fee paid solely by the buyer.
Home Appraisal Fee
Lenders require that an appraisal of the property be performed prior to their final approval of the loan amount. This is to be sure that it’s lending the buyer money for a property that’s at least worth the loan amount.
A qualified Texas home appraiser will be familiar with this type of request and likely has a set fee structure which can vary but will typically come in around $500-$750. This fee is typically paid by the buyer unless otherwise agreed to in the purchase agreement.
It’s important to note that if the appraisal finds that the property value is less than the sale price, this could potentially kill the deal. Knowing what your home is worth is essential to a smooth transaction.
Credit Report
This is a necessary cost for a buyer using any Texas mortgage lender but the payment is usually grouped in with the final billing. Since only the buyer is subject to a credit check in a home sale, they are responsible for the cost of obtaining one.
A credit report will usually cost about $50 – $75.
Homeowner’s Insurance
The buyer will typically be required to put a year’s worth of insurance payments in escrow. This amount varies depending on the coverage but is typically between $400 – $1000.
As a buyer, it’s important to include homeowner’s insurance in your budget. Call around and see what kind of rates are offered in your specific area so that you have a realistic idea of what you’re looking at paying for this.
Notary Fees
Notary services are required for several of the documents involved in a home sale. Buyer and seller will usually pay for the costs they incur directly.
Notary fees will cost around $100 in total but will vary depending on the type and amount of documents involved in the transaction.
Home Warranty
This is a safeguard for the buyer and covers items that may not be covered by the homeowner’s insurance policy (like the water heater, refrigerator, etc.) for a year. This ensures that the buyer gets off to a good start in their new home and doesn’t immediately have to fork out money to replace something.
This cost is typically paid by the buyer unless otherwise agreed to in the purchase contract. The cost usually comes in at around $500 – $700 depending on the size of the property and its contents.
Who Pays Closing Costs In Texas?
Here’s a recap of the fees and who is responsible for them:
Broker commissions: 5% – 6% of the home sale price, buyer and seller split.
Escrow: $350 – $600, buyer and seller pay direct.
Title Search: $100 – $200, buyer and seller split.
Title Insurance: .9% – .6% of the home sale price, buyer pays endorsements, seller pays premium.
Municipal Lien Search: $100 – $200, buyer and seller split.
Property Taxes: Varies, both parties pay pro-rated amounts.
HOA Estoppel: $200 – $500, seller pays.
HOA Documents: $200 – $250, seller pays.
HOA Transfer Certificate: $200 – $250, seller pays.
Outstanding Amounts: Varies, seller pays.
Recording Fees: $120 – $160, buyer pays to record deed and mortgage, seller pays for recording to remove encumbrances.
Loan Origination Fees: Varies, buyer pays.
Home Appraisal: $500 – $700, buyer pays.
Credit Check: $50 – $75, buyer pays.
Homeowner’s Insurance: $400 – $1000, buyer pays.
Home Warranty: $500 – $700, buyer pays.
Notary Services: $100, buyer and seller split.
Purchase Agreement Over Everything
Although we’ve assigned most of these costs, it’s important to remember that the Purchase Agreement rules all. Whatever is agreed to between the parties in that contract is what will become record.
Where Do I Start?
So how much are closing costs in Texas? They’re cheaper than missing out on a red hot seller’s market!
Texas real estate is in high demand with low inventory. If you’re looking to sell or refinance your home, this is the kind of market that is most likely to provide the best return on your investment.
If you’re not sure whether you’re ready to pull the trigger on selling or refinancing, getting an estimate of your home’s current value may help you decide. It’s fast, free, and easy!
Submit your address, answer a few quick questions and if you’re considering refinancing or selling. Once you submit the form, we’ll gather relevant market information and put together an estimated valuation of your home.
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