Closing costs can add up quickly for sellers, but by exactly how much? Before you sell your Texas home you’ll want to read on to learn what closing costs you’ll be responsible for and how much it will cost you.
Sellers get the better end of the deal when it comes to closing costs. As a seller, your closing costs range anywhere between 1% to 3% of the sales price, while on the other hand, buyers will be coughing up around 3% to 4% in closing costs.
Though, you may not want to celebrate just yet as your closing costs don’t include realtor fees — you’ll still need to pay your agent’s commission and the buyer’s agent’s commission which, on average, totals 6% in Texas.
If those fees seem a bit steep, you’ll want to explore all your options on how you can reduce the costs of selling your home. One alternative is working with a top-rated, full-service agent who works for a fraction of the typical commission fee.
If you’re interested in saving up to 50% on commission costs on closing day, reach out and get connected with an agent in your area.
But first, here’s an in-depth look at how much you should expect to pay in closing costs when selling your home in Texas.
What are closing costs?
Closing is the last and final stage in the home selling process. This is the moment when all the documents are signed and payment goes through, finalizing the transfer of property ownership from you to the buyer.
Since a smooth closing relies on third-party services — like an escrow company — someone has to cover those expenses.
Both you and the buyer will also be responsible for an assortment of closing costs. As the seller, your closing cost fees will mostly relate to transferring ownership of your home while the buyer will mainly cover closing costs associated with their lender.
How much are closing costs in Texas?
While total closing costs can range anywhere from 1% to 7% of the sales price of your home, neither you nor the buyer will pay the entire amount. Typically, you as the seller will pay between 1% and 3% compared to buyers who pay between 3% and 4% of closing costs.
It’s good to note however, that even though you luck out and avoid the brunt of closing costs, you as the seller will still have to cover commission costs which can add on as much as an additional 6%.
How you can pay less in commission?
A Clever Partner Agent can show you how to save thousands in realtor fees.
How to Calculate Your Closing Costs in Texas
So how much will you actually pay in closing costs for your Texas home?
To figure out the amount, simply multiply the price of your home by the typical closing cost percentage of 1% to 3%.
For example, as of September 2019, the current median listing price in Texas is $279,000. If you multiply this by the typical closing cost percentage (1% to 3%), you’ll find that your closing costs will range anywhere between $2,790 and $8,370.
What’s included in Texas closing costs?
While closing costs are normally divided among the buyer and seller in a similar way, nothing is set in stone. Who pays what is negotiable so it’s essential to be familiar with all closing costs in case your buyer requests you pay a portion of their closing costs.
Title search: $300 to $600
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.
Title insurance: $1,775 on average
Title insurance protects the buyer from any financial loss due to issues that arise with the title such as outstanding liens. While the price of title insurance depends on your home, for the Texas median home price of $279,000, your title insurance will cost more around $1,775.
Home inspection: $200 to $490
Conducted before closing, a home inspection will reveal any major issues with your home such as structural or foundational damage. Costs vary by company and city — for instance, in Austin a home inspection will cost you $452.
Appraisal: $300 to $425
An appraisal determines the value of your home to assure the lender the property is indeed worth the amount they are giving the buyer.
Survey: $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 your lot size and type of property.
Credit report: $20 to $50
This fee covers the cost for the lender to pull the buyer’s credit history and credit score.
Loan Payoff Costs: 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.
Mortgage Payoff/Prepayment Penalty: Varies
This is the amount you still owe on your mortgage. You’ll need to pay off the rest of your loan at closing and if you pay before your mortgage’s term ends, you may be charged a prepayment penalty.
Outstanding Amounts Owed on the Property: Varies
You’ll be responsible for any unsettled payments on your home that can include homeowners association fees (HOA), property taxes, utility bills, and homeowner’s insurance. All of these extraneous costs will be prorated to your closing date.
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.
Settlement Fee: $2 per $1,000 in sales price
While you can avoid attorney fees (Texas doesn’t require an attorney present at closing) you’ll still need to pay a settlement fee. A settlement fee is what you pay to the title company or escrow company for their services on closing day.
Other Home Selling Costs in Texas
Most sellers tend to underestimate the cost of selling their home. On top of your 1% to 3% in closing costs there’s a slew of additional home selling costs you’ll want to factor in.
One of the biggest costs of selling your home is undoubtedly commissions.
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 6% of your home’s sale price, which is split between the two agents.
For a Texas home selling at the state’s median sales price of $279,000, with a 6% average Texas commission rate, you’ll be paying $16,740 in commission.
Along with commission, you’ll also want to budget for any repair costs that crop up during the inspection. The repairs could be as simple as repainting or replacing a cracked tile, but depending on the extent of damage found, you could be out thousands of dollars.
Keep in mind, the cost of selling your home don’t only pop up at the end of the selling process. Even before the buyer sees your home, you’ll have to shell out to pay for any home improvements and upgrades to prepare your home for open houses — such as landscaping or staging your home.
Who pays closing costs in Texas?
Typical Seller Closing Costs
The 1% to 3% in closing costs will typically cover any expenses related to paying off your home’s taxes, utilities, and loan payment as well as any fees required to transfer ownership of your home to the buyer. Here’s what you can expect to pay in closing costs:
- Title insurance for the buyer
- Settlement fees
- Mortgage payoff and possible prepayment penalty
- Escrow fees
- Prorated property taxes
- Recording fees
- Other amounts owed like HOA fees and utilities
Typical Buyer Closing Costs
The buyer typically gets hit with more closing costs, ranging anywhere from 3% to 4% of the sales price. Their costs are mostly associated with loan fees and proving to the lender the home is a solid investment with no major issues. Here’s what the buyer can expect to pay in closing costs:
- Application fee
- Courier fee
- Title search fee
- Appraisal fee
- Credit report fee
- Home inspection
- Lender’s title insurance
- Survey fee
- Origination fee
- Underwriting fee
- Prepaid interest
- Recording fees
- Escrow fees
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 some of their costs, you’ll help ensure the sale of your home goes through. 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 pressure on the buyer and provide them with enough financial cushion to sign on the dotted line.
Another advantage to paying for the buyer’s closing costs is that it can give you the edge over other sellers, especially in a buyer’s market. Offering to pay closing costs can be the deciding factor for buyers to pick you over another.
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, repair costs, staging and curb appeal expenses, plus, 1% to 3% in closing costs, or more, if you decide to cover the buyer’s closing costs as well.
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, Clever can help you put more money back in your pocket when selling your Texas home.
Get in touch with Clever and we’ll connect you with a full-service, top-rated Partner Agent who can help you save thousands on commission as all Clever Partner Agents work for a flat fee of $3,000 or 1% if your home sells over $350,000.