Congratulations! You’re almost done with the process of selling a house in Texas. Closing on a home can be one of the most exciting moments as a seller but it can also be a stressful one if you aren’t prepared. Seller closing costs Texas can be quite expensive. A long list of regulations also make it a tedious state for a seller and that’s why many sellers end up paying more than they need to.
Don’t feel overwhelmed by the seller closing costs in t! We’re here to explain the process to you simply and effectively so you don’t make mistakes along the way. Let’s focus on sellers closing costs in Texas first.
- Closing costs are what you pay before you sign the final papers and receive money from the buyer.
- Closing costs and the property price are two different things.
- Both sellers and buyers need to pay separate closing costs.
- In Texas, title companies and escrow companies are responsible for closing costs.
- Fees and taxes can vary from one county to another in Texas.
💰 CALCULATE YOUR CLOSING COSTS IN TX
What are Closing Costs in Texas?
Closing costs are a collection of taxes and fees that buyers, and sellers need to pay before a real estate transaction can be finalized. These costs can vary depending on the size of the property, its location, real estate agent fees, and other related expenses.
The median home value in Texas is around $315,815, and the average closing costs for seller in Texas can be anywhere between $19,000 and $32,000.
Who Pays Closing Costs in Texas?
Both buyers and sellers share this burden, but sellers usually have to pay more. Some sellers even pay the buyer’s closing costs as an added incentive. The closing costs in Texas for seller is typically deducted from the proceeds from the sale of the property.
If the offer price is attractive enough, a seller can choose to pay the entire closing costs to sweeten the deal for the buyer. Sellers need not wonder about how much is an appraisal in Texas because buyers are the ones usually responsible for costs like appraisal fees, title insurance, and mortgage fees.
Texas real estate brokers will know who is responsible for the closing cost in the state, so you can discuss the matter with them in detail. It is important to note that closing costs are negotiable, which means you can discuss the expenses with the buyer and come up with a favorable solution for both.
This can be a time-consuming process, especially if you don’t understand the details well. Knowing the seller closing costs in Texas will help you save time, money, and stress.
» Estimate Seller Closing Costs Calculator Texas: Calculate seller closing costs using Houzeo’s advanced Closing Cost Calculator
How Much are Closing Costs in Texas?
Texas seller closing costs can vary from one county to another but they generally range between 6% to 10% of the property cost. If the cost of your property is around $300,000, when you sell your home in Texas you may need to pay $18,000 to $30,000 in closing costs alone, this includes all taxes and real estate agent fees.
A seller’s biggest expense is the real estate agent’s commission. You need to pay the buyer and listing agent’s commission, which can easily be 5%-6% of the total price of your property. Other expenses include loan payoffs, escrow fees, taxes, transfer fees, and more.
Don’t worry, we will take a deeper dive into estimated closing costs for seller in Texas.
What are the Typical Closing Costs for Seller in Texas?
1. Escrow Fees
Escrow fees are essential fees you pay to an escrow company to hold and transfer money in a real estate transaction. Both the seller and the buyer needs to pay for this service to an escrow company or the mortgage lender that holds the money. The buyer will pay the amount into an escrow account held by the company after they have committed to a purchase. Once the deal goes through, the seller will receive the amount securely and sign the property over to the buyer.
Escrow helps buyers and sellers avoid fraud, ensuring that the money exchanges hands safely at the end of the transaction.
2. Loan Payoff
If you have a pending loan on your property, you need to pay it off before the transaction can go through. For example, say you have four or five installments of your mortgage loan left, but you still want to sell your property, you will need to clear those dues before you can sell the property.
Loan payoff is a big expense for most sellers, and it can depend on your pending loan amount. Some banks may even charge extra for prepayment of the loan as they lose profits from interest. If there is no loan on the property, this expense won’t be included in the seller closing costs in Texas.
3. Home Warranty Fees
Buyers make a big investment when they purchase a property, which is one of the reasons why they need some assurance. A home warranty is a policy that covers all appliances attached to the house like a refrigerator, washer, dryer, dishwasher, etc. The warranty assures the buyer that these appliances are in relatively good condition. If the appliances falter, their repairs may be covered by this warranty. This depends on the type of policy the homeowner has and what kind of coverage it offers.
A home warranty makes things less expensive if the appliances fail at any point during the warranty period. The average cost of home warranty in Texas is around $450 to $850.
4. Real Estate Commission
This is a major expense for most sellers unless they opt for the For Sale by Owner option. Traditional real estate agents can charge anywhere between 5% and 6% of the property cost as fees. Considering the typical home value, the average Texas real estate agent commission rate is $17,000.
More often than not, TX FSBO sellers need to pay the buyer’s agent fees. Buyer’s agent typically charges around 2% to 3% of the purchase price.
The agent fees can differ depending on the location, property value, and the agreement by the buyer.
» Discount Real Estate Brokers Texas: The best of both worlds! Opt for full-service discount realtors in Texas at a lower commission.
5. Property Taxes
Sellers need to pay property taxes for the duration of their property ownership. As property taxes in Texas are paid in arrears, you will owe the local government taxes for the portion of the year you owned the property. For example, if you sell the property in August, you will have to pay the property taxes from January to August. If you sell the property earlier in the year, like in the months of January or February, your tax burden will be lighter.
Texas state doesn’t collect property tax, and it is left to the local body to set the rates. The average property tax in Texas charged by counties is around 1.8% of the total property value, which is some of the highest in the country. For example, if your home is valued at $300,000, you may end up paying around $5,400 in local property taxes. You will need to check with your local government body to understand your true tax burden.
6. Settlement Fees
Texas isn’t an attorney state, which means you don’t need to hire a licensed real estate attorney to complete the closing procedures. However, you need the services of title and escrow companies to ensure the deal goes smoothly with all T’s crossed and I’s dotted.
These fees can range between $350 and $600 dollars, depending on who you hire and where your property is located. Settlement fees can be split between buyers and sellers, though this is negotiable. You need to pay the settlement fees on the closing day and clear all dues before the final contract is signed.
7. Title Search
Title search is used to establish ownership of the property and its boundaries. It also helps determine whether there are any liens on the property, which can cause trouble for a buyer down the line. A title search is carried out by dedicated companies who scan public documents and look at house blueprints to ensure everything is in order.
Homeowners need to pay title fees in Texas to carry out the procedure. This fee can differ based on your location but is usually between $100 and $200.
8. Title Insurance
In many states, title search and buying the title insurance policy is the responsibility of the buyer, but Texas is different. Here, the seller bears the cost of title insurance, though this is negotiable. Title insurance is the process of insuring your property against future problems with the title deed, like liens, mistaken records, and similar problems that don’t show up in a title search.
So, what is the cost of title insurance in TX? Fortunately, the title insurance costs in Texas are set by the state. If you have a $300,000 home, the title insurance can be around$1,886. It is easy to calculate the amount based on the details mentioned on the government site.
» Who Pays for Owner’s Title Insurance in Texas: Read further to know more about owner’s title insurance in Texas.
9. Municipal Liens Check
This check is to look for problems that don’t show up in the title search. These issues are usually unrecorded and go unnoticed. It can cost around $200, and the price can be different based on where you are located in Texas.
10. Recording Fees
When you file real estate property documents with the local government, you need to pay a recording fee. These fees are a part of the typical closing costs in Texas. They cost $26 for the very first page and $4 of each extra page, though the cost can differ slightly from one county to another. The recording process is usually handled by the title company or escrow company that handles the closing process. If you have hired a real estate attorney for the job, they will be responsible for it.
11. HOA Estoppel
Before a real estate transaction can be completed, you need to get a binding letter from the Homeowner’s Association to clarify that there are no dues, fines, and fees from the past due on the property. The letter will also explain what kind of fees the buyers need to pay once they gain ownership. Usually, the HOA estoppel fee adds around $200 to $500 to the typical closing costs in Texas for a home.
12. HOA Dues
If you have any unpaid fees and fines with the HOA, you need to clear them before signing the property papers. These expenses can add to your closing costs. You may also need to pay the HOA transfer fee to transfer the property to the buyer’s name. The fees can vary based on your county and your HOA’s policies.
13. Buyer Incentive/Seller Credits
Occasionally, your home buyer will ask you at closing to credit a specific amount to help cover their buyer closing costs. Aside from that, the buyer and seller will start negotiating the loan amount and conditions. This includes the sale contract.
Seller credits could favor both sides. By providing a seller credit, sellers can attract prospects and buyers can decrease their own costs at closing. Cash-strapped customers can apply for a seller credit and raise their bidding price.
Sometimes the sellers may offer to cover the buyer closing costs as well. These include loan origination fees, appraisal, survey, recording fees, mortgage-related fees, home inspections, and credit report.
These are the general closing costs in Texas 2023 but they are subject to change. When you go through the selling process, make sure your information is always up-to-date.
» How Much are Closing Costs for Buyer in Texas: Find out more about the typical buyer closing costs in Texas before deciding on seller credits.
Seller Closing Cost Calculator Texas
All of this sounds pretty complicated, doesn’t it? No one likes getting lost in numbers, which is why Houzeo has developed an advanced Closing Cost Calculator. You can use this calculator to determine Texas closing costs.
Our calculator provides a detailed list of the expenses you can expect during closing. You get a more accurate idea of the Texas average closing costs and plan accordingly. The calculator also mentions all of the junk costs that you can avoid.
» Estimate Seller Closing Costs Calculator Texas: Check your closing costs now!
How To Prepare for Your Texas Home Closing
After paying the closing cost on a house in Texas, the process can finally come to a close. The seller formally hands over ownership of the house signing the final documents and receiving the funds from the buyer. Your escrow agent would simplify the process. Not only will your escrow agent assist you with acquiring title insurance, but they will also prepare records for closing. They will also speak with third-parties like HOA, Texas home inspector, and buyer agents.
Just to be safe, we recommend you review everything and make sure your documents are in order.
1. Look at Your Documents
Document errors are surprisingly common and can cause a lot of trouble down the line. That’s one of the reasons why reviewing and double-checking everything is a good idea. Make sure all of your closing documents are in order and consult with your escrow agent or lawyer if you have any concerns. Some of the most important documents you will sign during closing include:
- HUD-1 Form/ Closing Disclosure – This form must be submitted to the borrower three days before the scheduled closing date. This gives them time to see all of the closing costs and share that information with their mortgage lender. The buyer will still need the complete document if they are purchasing the property in cash.
These documents provide a detailed insight into closing fees in Texas. Make sure there are no errors like typos, spelling errors, mistaken information, or outdated information in these documents. Disclosures are covered by Section 5.008 of the Property Code and lying on them can have legal repercussions.
- Deed – The deed is the most important document in a real estate transaction. It legally transfers the title from the seller to the buyer. Once signed, the seller becomes the previous owner and the buyer becomes the current owner of the property. It is absolutely vital that this document doesn’t have any errors. Review the document multiple times and get it reviewed by a third-party like a lawyer or an escrow agent, just to ensure there are no errors.
You need to look at details like deed book page, deed book, legal description of the property, and the Property Identification Number if your property has any. Make sure all of these papers are in order before you sign anything as these mistakes are a nightmare to fix post closing.
2. Disclosure Forms You May Need to Provide
There are several disclosure documents you may need to provide during closing, depending on unique factors related to your property. You will need to disclose:
- Items present on the property
- Structural Defects or Malfunctions
- Condition of the House
- Flooding and Flood Plan
- Previously Claimed Flood Insurance
- Tax Exemptions
- Inspection History
- Property Survey
- Smoke Detectors
- Federal Disclosure on Lead-based Paint and/or Lead-based Paint Hazards
- Fire Alarm Installation Certificate
» Texas Sellers Disclosure Notice: Take an in-depth look at the seller disclosure requirements in Texas.
3. Bring Two IDs
It is best to bring two official IDs along with you to ensure our identity is never in question. You will need it during the closing process as the notary will verify your identity before you’re allowed to sign the deed. Most people bring their driver’s license and/or passport. Bring an additional ID along in case something goes wrong.
4. Don’t Forget to Ask for Help
Texas real estate closing costs and processes can be intimidating, especially for first-time sellers. Escrow agents, lawyers, and title companies are all there to help you. Don’t hesitate to ask questions and ask for assistance wherever needed. If the documents are confusing or if there are a few fields in a form that baffle you, speak with the experts around you.
Note: This is only a quick guide for all the sellers in Texas. Despite most information readily available online, seeking expert advice helps progress the process of selling a home.
When you’re thinking about how to sell your home in texas, you will have to deal with all kinds of closing costs. If you don’t understand the seller closing costs in Texas, you may end up spending more than you need to. It is best to account for closing cost percentage in Texas before determining the listing price.
Are you ready to sell? Houzeo can help! We have a wide range of tools available to help TX FSBO sellers go through the process smoothly. At Houzeo, We use cutting-edge technology and deep industry know-how to ensure sellers go through the entire listing process smoothly. Our customer-centric approach and affordable options will make this important journey less stressful. Embrace independence and try Houzeo today.
Frequently Asked Questions
1. How long does it take to record a deed in Texas?
It can take around 14 days to 90 days for the local government to go over every detail of the document before approving it. They need that much time to ensure there are no errors.
2. Do I have to pay capital gains tax in Texas?
No, Texas doesn't have any dedicated local or state-level tax for capital gains. The additional income is taxed through IRS. If you make a profit on your home sale, you will need to declare it to the IRS.
3. How are closing costs for sellers in Texas calculated?
There are several factors that go into calculating closing costs. Fortunately, Houzeo's closing cost estimator is a free tool and can help you get an estimate.
Selling a House in Texas: Everything You Need to Know
- Who Pays for Closing Costs in Texas: Closing Costs in Texas can vary according to the type of real estate deal. Here is what you need to know!
- Cash Buyers for Homes in Texas: Home sellers have lesser paperwork and inspections when selling their houses to cash companies. We have ranked the best cash home buyers near you.
- Sell My House Fast Texas: Know How to Sell Your House Fast in Texas.
- Selling House As Is in Texas: Selling a house “as is” is the best option for home sellers who want to save time and money. Here is a handful of information that you need to know beforehand.
- Low Commission Broker: If you want to save money on commissions while still receiving ongoing assistance and support, consider using a low commission broker.
- Texas Multiple Listing Service: Learn about Flat Fee MLS and companies that offer the best services near you. Here’s our detailed blog on the top Flat Fee MLS companies in Texas.
- Housing Market Predictions 2023 Texas: Read further to know more about housing market trends in Texas.
- How to Sell By Owner in Texas: A comprehensive guide!
- Cash Offer on House Texas: Here’s what you NEED to know about cash offers in Texas
- For Sale By Owner Websites: Here is our top pick of For Sale By Owner Websites you can opt for.
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