Closing Costs and Fees

To better understand closing cost, let's first consider some items that Seller's will be responsible to pay, completely outside of the real estate contract between a Buyer and Seller.

• Sellers, when selling using Real Estate Brokers and the MLS, are required to pay all commissions from the sales price. 

• Any current or existing mortgages, HELOCs, liens, etc, must be all paid off at closing from the sales price proceeds.

• Any daily prorated property taxes. If the sale closes on July 1st, essentially, the Seller is responsible to pay at closing 6 months of taxes.

• HOA Fees - There could be HOA dues owned. These amounts are normally prorated, and if already paid upfront by the Seller, the Buyer will have to pay the prorated amount due for the remaining portion of the year.

• Title company escrow fees. Title companies in Texas charge an "admin" fee (escrow fee) to close at a title company. On average, this is $1000, split 50/50 between the Buyer and Seller.

• Miscellaneous escrow and title fees: This is normally attorney document fees, tax certificate fees, and deed filing fees. In total, this averages about $250 for the Seller's expense.

Negotiable Items from a standard  Buyer/Seller Home Sales Contract in Texas.

These are a few common items that can be negotiated between a Buyer and Seller for residential transactions in Texas.

• Owners Title Policy - Essentially, this is title insurance, and regulated by the State of Texas, but required in all residential transactions. This is a big way on how title companies get paid. The cost varies and is based on the sales price, but can add up to be thousands of dollars.

• Home Warranty Service Plans - Have you ever heard of American Home Shield? This is a warranty plan that covers appliances and other systems in the home like HVAC or plumbing. In many cases, the Buyers will ask that a Seller contribute up to $500-$700 towards the purchase of a Home Warranty that covers the new owners of the home if something breaks.

• HOA Transfer Fees and the cost to obtain HOA "Resell Certificates." Nearly all HOA's charge an administrative fee to change the owners name in their system, oftentimes around $150. There could also be added costs to obtain financial records (especially if the property is a condo) that could be an extra $300-$500. In very rare circumstances, there could be HOA reserve fees, funding fees, and "foundation" fees.

• Survey - Most residential transactions (excluding condos) oftentimes require a survey to close. Many Sellers already have an old survey from when they previously closed, so that could save everyone some money.

• Non-realty items or appliances - Sometimes, Buyers will ask for a Seller's personal property to be included, like wall mounted TVs, drapes, furniture, and appliances. 

• Any sort of Seller's Contribution to Buyer's Closing Costs - Some Buyers will ask a Seller to assist them financially with a "kick-back" credit towards their mortgage closing costs. Keep in mind that any credits are deducted from the sales price, so everything needs to be worked into the sales price. 

More details below....

Closing Cost Estimates:

Typical seller fees could be: Title company fees, document prep fees, title policy, etc..... The list goes on and on.

Although everything is negotiable, these are typical fees that are customary for each party to be responsible for.

• Property Taxes: $$$$

  • Depending on when you close during the year, taxes will be prorated based on 365 days (and seller pays from January 1 to the closing date, including the day of closing). Find your taxes on your tax bill or on the appraisal district's website.

• Owners Title Policy: $$$$

  • For most real estate transactions that involve Realtors, it is customary for a seller to pay for an Owner's Title Policy for the buyer. For a quick calculation estimate, it's normally around 0.7% of sales price. To put that in perspective, here is the cost of a title policy cost based on the following sales price: $100,000 = $832 | $200,000 = $1359 | $300,000 = $1886 | $400,000 = $2413 | $500,000 = $2940 | $600,000 = $3467 | $700,000 = $3994 | $800,000 = $4521 | $900,000 = $5048 | $1,000,000 = $5575

• Title Company Closing Fee: $$

  • This is the fee a title company charges to close a transaction with them. Normally between $450-$550

• Tax Certificate Fee: $

  • This is a fee that the title company normally charges to the seller to access a certified tax record for the property. Normally around $75-$100

• Title Company Attorney Fee: $

  • This is the cost the title company charges to have a lawyer draw up the documents for closing. Normally around $150

• Document and Recording Fees: $

  • This is the cost a title company charges to file the documents at the county clerks office. Normally around $50

• Home Owner Association Fee: $

  • HOA fees can be classified as the prorated yearly HOA fees, transfer fees, or HOA resell certificate. If your home belongs to a mandatory HOA, the HOA or property manager WILL charge either the seller or the new buyer fees (admin fees). If you are located in a master planned or gold course community, these fees could be in the thousands. Normally between $100-$300

• One Year Home Warranty: $$

  • Have you heard of companies like American Home Shield? Basically, these companies provide an insurance policy for home owners that covers non-structural items like appliances, minor plumbing leaks, and HVAC breakdowns. For buyer's, they claim this is for peace of mind. It is very common for buyers to ask for this is many home sales contracts. Normally between $500-$700

  • Realtor Commissions: $ - $$$$

    • Typically, commissions are classified as a seller expense.

    • A few points about commissions...

    • If a seller pays a buyer's commission, remember.... It's the buyer who is paying the seller the money to buy the home. So indirectly, it's really the buyer paying for commissions. The seller just needs to make sure the buyer's purchase price is enough to pay commissions.

    • Buyers typically cannot afford to pay CASH out of their own pocket to pay their Realtor at the closing.... Buyers, therefore, are forced to wrap their buyer's agents commission into their purchase price (and mortgage). Unfortunately, this is also the way our financial/banking system is set up. The government (FHA, VA and other conventional institutions) are all set up using this practice. In Houston, Buyer's agents will ask for 3% of sales price as their commission fee to bring the buyer to the seller.