Closing Costs for Sellers in Texas
Let’s face it, if you want to sell a house, you probably need to know something about closing costs. Closing costs are a part of all real estate transactions in Texas. Most often, in a real estate transaction the seller is responsible for paying most of the closing costs. However, many of these closing costs are negotiable, so it’s important to understand that, as a seller, you may have options for asking the buyer to cover some of the closing costs. In this article, we’ll outline some common closing costs in Texas and provide some guidance for your options on negotiating closing costs.
What are Closing Costs, Anyway?
In a nutshell, closing costs are the fees that are due at the closing of a real estate transaction. Closing costs may include real estate commissions, title insurance premiums, taxes, and various other fees. By law, closing costs must be disclosed in in the purchase contract between the buyer and seller and agreed upon before a real estate deal can be completed.
If you’ve decided to list your house with a realtor, the buyer’s agent will present the seller’s agent with an offer using the Texas Real Estate Commission Standard Residential Purchase Contract (also called a One-to-Four Family Residential Contract). This purchase contract is 10 pages long. Additionally, there are often numerous addendums included with the purchase contract, which can quickly add up to a set of terms that are very difficult to understand. All of the closing costs are disclosed in these agreements, but it’s not always easy to understand exactly who pays for what.
On average, home sellers in Texas pay 6% in real estate commissions and another 2% to 3% in other closing costs. Add it all up, and the total closing costs for a seller in Texas will typically be between 8% and 9% of the sales price. For example, on a $300,000 home, the seller can expect to pay between $24,000 and $27,000 in closing costs.
In this article, we’ll break down the closing costs into a few different categories so that they’re easier to understand and identify. We’ll also discuss who typically pays for each of the costs so that you can be better equipped to negotiate with the buyer.
On a traditional home sale with a realtor, the single biggest cost to the seller is usually the realtor commissions. Most homeowners are aware that there are two commissions paid when a house is sold – one commission to the seller’s agent and one commission to the buyer’s agent. However, what many homeowners are not aware that both the seller’s agent commission and the buyer’s agent commission are paid by the seller. Traditionally, a seller will pay 6% of the sales price in total commissions between a seller’s agent and buyer’s agent. On a $300,000 home, that equates to $18,000 right off the top just to pay for realtor commissions.
Title Insurance Premium
Title insurance is a way to protect a buyer from financial loss in the event there is a defect in the title to the property that they purchase. When you sell your property, a title company searches extensive public records to find – and remedy, if possible – any liens, encumbrances, or title issues that would prevent the ownership of a home from being transferred from buyer to seller. This process is called “clearing title” and it gives the buyer confidence that are no defects to the title of the home they are purchasing.
The fee for the title insurance premium is set by the state, and is calculated as a percentage of the sales price. On our example $300,000 home, the title insurance premium will cost $1,886. You can use the estimated sales price of your home on the Texas Department of Insurance website to calculate the title insurance premium for your home. The title insurance premium is most commonly paid by the seller.
The escrow fee is an administrative fee that the title company charges to work on the file through closing. This fee is set by the title company and typically ranges from $350-$700 depending on the title company. The buyer and seller will each pay an escrow fee at closing, so this fee isn’t typically negotiable.
Doc Prep Fee
On the day of closing, there are several documents that are prepared by the title company’s attorneys, including the warranty deed. The fee to prepare those documents typically ranges from $100 to $150. Document preparation fees are typically paid by the seller.
At the time of closing, the title company is required to balance and prorate year-to-date property taxes. In order to do this, the title company will order a tax certificate meant to verify the correct amount of taxes to collect. The tax certificate can vary based on the title company and/or the county but typically ranges from $40 to $70. Tax certificate fees are typically paid by the seller.
To prepare for a closing, a variety of documents need to be collected and/or mailed from various county agencies and offices. Some title companies will pass those fees on to the buyer and seller. These mail/courier fees can range from $25 to $150 depending on the number of documents required, the cost of postage, the specific fees of the courier service. Mail/courier fees are typically paid by the seller.
Mobile Notary Fees
Especially today, in COVID times, closings facilitated by mobile notaries are becoming more common. If you’d prefer not to go to a title company’s office to sign all of the documents, it is possible to have someone come to you, and facilitate the signing of the documents from your home or office. Typically this is a $150 to $250 fee for each signing (i.e. the buyer and the seller sign separately) depending on the situation. The buyer and seller will each be responsible for their own mobile notary fees, if applicable.
In the purchase contract, a home warranty is referred to as the “Residential Service Contract”. This is one year home warranty that covers some mechanical items in the home, like the air conditioner, appliances, or water heater. The cost for a home warranty is typically between $500 and $700. Though this is a negotiable item, it is common for the buyer to ask the seller to cover the cost of a one year home warranty.
If you have an existing survey, you may be able to use that at closing and will not incur any additional expense here. But, if you are not able to find an existing survey, a new survey will have to be ordered. Expect to pay somewhere between $450 and $550 for a new survey. Large lots or acreage properties can cost significantly more in some cases. If a new survey is required, it is negotiable who pays for it. With that said, most buyers purchasing a home expect to have a survey provided to them if they are paying fair market value for the home.
Survey Deletion Endorsement
The survey deletion endorsement offers buyers protection for errors that may have been made by the surveyor. Think of this as adding additional insurance to the title insurance policy for errors made by the surveyor that could harm the buyer. The cost is 5% of the title insurance premium. For our example $300,000 house, that fee would be $94.30. This is a negotiable item that can be paid for by the buyer, but it’s fairly common for the buyer to try to get the seller to pay for it.
If the property is in an HOA, the HOA will have several fees that have to be paid at closing. HOA documents, resale certificates, and transfer fees typically cost between $550 and $750. The HOA fees are typically paid for by the buyer, but these are also negotiable.
Let’s do the Math
So to quickly recap, let’s stick with the example of a $300,000 house and calculate the closing costs that you can expect when selling a house in Texas. Keep in mind, these are averages and vary depending on a number of factors. It’s always a good idea to ask your realtor or title company to provide you with a seller’s net sheet before accepting an offer from a potential buyer.
Here’s a summary of the seller closing costs for our example house:
- Listing Agent Commission: $9,000
- Buyer’s Agent Commission: $9,000
- Title Insurance Premium: $1,886
- Escrow Fee: $550
- Document Preparation: $125
- Tax Certificate: $50
- Mail/Courier Fees: $100
- Mobile Notary: $150
- Home Warranty: $550
- New Survey: $500
- Survey Deletion Endorsement: $94
- HOA Fees: $600
Grand Total Closing Costs: $22,605
It’s important for homeowners to realize that selling your home may cost more than you initially thought. Some of these closing costs seem like small amounts, but when you add them up, it can be very expensive to sell a home in Texas.
Don’t Want to Pay Closing Costs?
If you’ve read this far and are looking for a way to save on these expenses, or just don’t want to deal with the hassles of listing your house with a realtor, we’d like to have the opportunity to work with you.
If you contact us, we can usually make you a fair all-cash offer within 48 hours. And we will pay all of your closing costs so that you exactly how much money you’ll put in your pocket at closing. And if you accept our offer, the closing can be scheduled on your timeline.
As a bonus, just for contacting us, we’ll prepare a free home valuation report so that you can have the information you need to make the best decision for your situation.
If you just have questions about selling your home to a cash buyer and aren’t ready to talk to anyone yet, we understand that too. Feel free to Get To Know Us or learn more about How Our Process Works.