If you own a home or have ever purchased one, then you probably are familiar with closings costs.
When you buy a home, you are on the hook for closing costs that including things like lender fees, an appraisal, a home inspection, and transfer taxes which total between 3% to 4% of the sales price of your home.
If you are now considering selling your home, then you'll also have to pay an additional set of seller closing costs that can be anywhere between 5-8% of your home's final sales price. These include real estate commissions, prorated property taxes and any contributions towards the buyer's closing costs that were negotiated in your deal.
How much are closing costs in Texas?
Closing costs include things like taxes, fees, lender charges, Realtor fees and prepaid mortgage charges. Several of these line items are paid by the buyer.
The seller is responsible for real estate commission fees, taxes and any seller contributions. Typically, the seller will pay between 5% to 8% of the sales price.
It's good to note however, that even though the seller may avoid all of the mortgage fees, you will still have to cover Realtor commission costs which can add on as much as 6%.
How to Calculate Your Closing Costs in Texas
So how much will you actually pay in closing costs for your home in Texas?
To figure out an estimate of the amount you'll pay, simply multiply the price of your home by the typical closing cost percentage of 5% to 8%.
For example, the current median home value in Texas is roughly $300,000. If you multiply this by the typical closing cost percentage (5-8%), you'll find that your closing costs could range anywhere between $15,000 and $24,000 when you sell.
What's included in Texas closing costs for both the buyer and the seller?
While closing costs are normally divided among the buyer and seller, nothing is set in stone. As we mentioned above, all closing costs are negotiable, so it's important to be familiar with all of them in case your buyer requests you pay a portion of their closing costs. Below, we have listed some of the most common closing costs in Texas and how much you can expect them to be.
Common Seller Closing Costs in Texas:
- Real Estate Agent Commission – typically 5-6% of the sales price: Assuming you intend to leverage the expertise of a qualified realtor and the buyer also engages an agent to purchase your home, you’ll be responsible for paying both of them at closing. This amount can differ greatly from one agent to another, but it is typically 2.5%-3% for each agent in Texas. You can reduce this cost by 2% if you sell with a SimpleShowing agent for a 1% listing fee.
- Outstanding amounts owed on the property: You'll be responsible for any unsettled payments on your home that can include HOA fees (homeowner's association) and utility bills. All of these extraneous costs will be prorated to your closing date.
- Prorated Property Taxes: Property taxes in Texas are paid in arrears. You’ll owe property taxes for the portion of the year you owned the house (be it 30 days or 300 days). They’ll be prorated based on the number of days you owned the home, so the amount you owe will be much higher for a November closing than one in early January (300 days vs. 30 days). Note: If your current mortgage payment includes an estimated amount for property taxes that they collect and put in “escrow”, then each month you should be able to get your escrow balance back after closing.
- Settlement Fee – typically $350 to $600: While you can avoid attorney fees (Texas doesn't require an attorney to be present at closing), you'll still need to pay a settlement fee to the title company or escrow company for their services on closing day.
- Title search – $100 to $200: A title search looks into the home's ownership history to ensure you're the true owner and that the title is clear of any liens or judgements.
- Municipal Lien Search – $100 to $200: The municipal lien search looks into unrecorded property issues that aren’t shown in a typical title search, such as code violations, water/sewer/solid waste balances, and open or expired permits, to name a few. The cost varies by municipality.
- HOA estoppel – typically $200 to $500: This letter certifies how much you owe the HOA. It includes your monthly dues, as well as any special assessments, past dues, fines or other fees. Since the HOA could potentially put a lien on your home for unpaid dues or to enforce violations, the title company must confirm that you are in good standing with the HOA and current on all your dues before they can give clear title on the home.
- Title insurance – rate is set by the state and based on the purchase price: Owner's title insurance protects the buyer from issues that arise with the title such as outstanding liens that were not discovered in the title search. The rates are set by the State of Texas, but depend on the price of your home. For the Texas median home price of $223,000, your title insurance will cost about $1,480. While who pays this fee is negotiable, the seller commonly pays it in most parts of Texas.
Common Texas Buyer Closing Costs:
- Loan origination fees (optional) – 0.5% to 1.5% of the sales price: These costs relate to any associated loan fees including application fees, prepaid interest, and loan origination fees. While a loan is optional, these will be present if a mortgage is secured to purchase the home.
- Appraisal – $300 to $500: An appraisal determines the value of a home to assure the lender the property is indeed worth the amount they are giving the buyer. The appraisal is often paid by credit card up front and therefore not due at the time of closing.
- Survey (optional) – $350 to $500: Many lenders will require a survey of the property to determine the location of any buildings and the property's boundaries. Costs typically vary depending on lot size and type of property.
- Credit report – $25 to $75: This fee covers the cost for the lender to pull the buyer's credit history and credit score.
- Home inspection – $250 to $600: Conducted before closing, a home inspection will reveal any major issues with a home such as structural or foundational damage. Costs vary by company and city — for instance, in Dallas, a home inspection could cost you $320.
- Recording Fees – varies by county: This fee covers the cost of registering the sale and transfer of your property. Once the deed of transfer is recorded, it will become part of the public record.
Should you pay the buyer's closing costs?
While it may seem counterintuitive to even consider paying for the buyer's closing costs, helping out the buyer can actually work to your benefit.
By paying for the buyer's closing costs or even a portion of those costs, you'll help ensure the sale of your home goes through smoothly. Buyers are saddled with the bulk of expenses in a real estate transaction — from the down payment and mortgage payments to property taxes and homeowner's insurance, buyers can feel a financial strain.
Paying for some buyer closing costs can relieve the financial pressure on the buyer and provide them with enough financial cushion to sign on the dotted line.
How can you reduce your closings costs when selling your home in Texas?
The best way to reduce your closing costs by a significant amount is to reduce the real estate agent commission.
Remember as the seller, you'll be responsible for paying all commission costs — both your agent's commission and the buyer's agent's commission. Typically, the standard commission rate is 5-6% of the home's sale price in Texas.
For a home selling at the state's median sales price of around $223,000 with a 6% average Texas real estate commission, you'd be paying $13,380 in commission.
If those fees seem high, you'll want to explore all your options on how you can reduce the costs of selling your home and keep as much equity as possible at the time of closing.
At SimpleShowing, you can sell your home with an experienced, full-service agent who works for a fraction of the typical commission fee – 1% listing fee. If you were to sell the median priced home at $223,000, you'd profit about $4,460 more with a SimpleShowing agent.
A SimpleShowing agent can show you how to save thousands in realtor fees if you're selling in Dallas and surrounding areas in Texas. Click here to get in touch with a SimpleShowing agent in your area.
Key Takeaways for Texas Home Sellers
It's important for homeowners to realize that selling your home will probably cost more than you initially thought — you'll be responsible for commission fees, potential repair costs, staging, and curb appeal expenses and more.
To help you navigate all your selling costs, it's important to consult with an experienced real estate agent who can provide guidance on the best approach to sell your home so you get the best deal possible.
And if saving money is a top priority, SimpleShowing can help you put more money back in your pocket when selling your home in Texas for only a 1% listing fee.
Connect with a full-service, top-rated agent in your area today who can help you save thousands on commission with our 1% listing commission.