How Much Are Closing Costs in Texas for a Seller?
Navigate Texas home selling expenses. Understand typical closing costs, how they're calculated, and potential negotiated fees.
Selling a home involves various financial considerations beyond simply paying off the mortgage. Understanding the associated expenses, often referred to as closing costs, helps sellers in Texas plan their finances. These costs are incurred at the real estate transaction’s completion, impacting the net proceeds a seller receives. Awareness of these expenditures allows for better financial preparedness.
Typical Seller Closing Costs
The most substantial expense for a seller in Texas is the real estate commission. This fee compensates the real estate agents involved in the transaction, including the listing agent and the buyer’s agent. Commissions are generally a percentage of the sale price.
Another significant cost for sellers in Texas is the owner’s title policy. This insurance policy protects the buyer and the lender from potential issues with the property’s title, such as undisclosed liens or ownership disputes. While buyers pay for this in many other states, sellers typically cover this expense in Texas.
Sellers also incur escrow or settlement fees, charged by the title company or closing agent for facilitating the transaction. These fees cover administrative services like preparing closing documents, holding funds in escrow, and ensuring all sale conditions are met. The amount can vary depending on the transaction’s complexity and the specific title company.
Property taxes are prorated between the buyer and seller up to the closing date. This means the seller is responsible for their share of the annual property taxes for the portion of the year they owned the home. The buyer then assumes responsibility for the taxes from the closing date onward.
If the property is part of a homeowners association (HOA), sellers may be responsible for fees. These can include a pro-rata share of HOA dues up to the closing date and specific transfer fees charged by the association to transfer membership and documentation to the new owner. These fees help integrate the new homeowner into the community association.
A seller may choose to retain an attorney to review documents or provide legal counsel throughout the selling process. Any fees for such legal services would be the seller’s responsibility. Recording fees are also paid by the seller to release the deed of trust from public records once the mortgage is paid off.
Calculating Seller Closing Costs
Real estate commissions are calculated as a percentage of the property’s sale price. While the percentage can vary, it ranges from 5% to 6% of the sales price. For example, on a $300,000 home, a 6% commission would amount to $18,000.
The premium for the owner’s title policy is determined by the Texas Department of Insurance and is based on the property’s sales price. The premium schedule is regulated, meaning the cost for a specific sales price is consistent across title companies. A $300,000 home might incur a title policy premium in the range of $2,000 to $2,500.
Prorated property taxes are calculated by taking the annual property tax amount and dividing it by 365 days to determine a daily rate. This daily rate is then multiplied by the number of days the seller owned the property during the current tax year up to the closing date. If annual taxes are $6,000 and closing occurs on July 1st (182 days into the year), the seller’s prorated share would be approximately $3,000.
Escrow or settlement fees can be a flat fee or a small percentage of the sales price, ranging from $500 to $1,500. This amount is disclosed by the title company early in the closing process. Homeowners association fees and transfer fees are fixed amounts set by the specific HOA. For instance, an HOA might charge a $250 transfer fee.
Any attorney fees would be based on the attorney’s hourly rate or a flat fee for specific services provided. Recording fees, which cover the administrative cost of updating public records, are typically a small, fixed amount, often under $100.
Negotiated Seller Contributions
Beyond the customary closing costs, sellers may agree to cover additional expenses as part of the sales contract. These are referred to as seller concessions and can impact the seller’s net proceeds from the sale. A common negotiation involves the seller contributing to the buyer’s closing costs.
Sellers might agree to pay a portion of the buyer’s loan origination fees, appraisal fees, or other costs associated with obtaining their mortgage. This can make the home more affordable for the buyer and facilitate the sale. The amount of buyer’s closing costs a seller can contribute is capped by lender guidelines based on the loan type and down payment amount.
Another item negotiated is the purchase of a home warranty for the buyer. A home warranty covers the repair or replacement of major home systems and appliances for a period, one year, after closing. Sellers may offer this as an incentive to attract buyers or to provide reassurance regarding the home’s condition.
Costs for repairs identified during the home inspection process can also become a seller’s expense through negotiation. If a buyer’s inspection reveals issues, the seller might agree to pay for specific repairs or offer a credit at closing in lieu of repairs. These agreed-upon repair costs directly reduce the seller’s proceeds.
While the buyer pays for a new survey, it can be negotiated for the seller to provide or pay for one. A survey confirms the property boundaries and identifies any encroachments. These types of negotiated contributions, while not typical seller costs, affect the financial outcome for the seller.