You're planning to sell your Texas home. Awesome! Selling a home could be one of the biggest moments in the life of a homeowner, especially when they are selling ‘for sale by owner’ or FSBO. But this can also be a stressful situation if one is not prepared.
When wondering how to sell a house by owner in Texas, one thing homeowners should learn about is the seller's closing costs. It’s natural to feel overwhelmed by this aspect of home sales. But we are here to make the process simpler for you.
What are Seller Closing Costs?
First, let’s understand what these costs are. Closing costs refer to the fees and taxes that sellers and buyers have to pay before the real estate transaction is finalized. While both parties pay these costs, the burden is usually more on the sellers.
Seller closing costs in Texas come up to an average of 8%. This sum is deducted from the final sale price of the house. Note that all such costs are negotiable, so it is important to be familiar with them if your buyer requests you to pay a part of their closing cost.
We have listed some of the most common seller closing costs in Texas.
Agent Commission: 5-6%
People selling home pay commissions to both their listing agent and the agent of the buyer. The standard rate is 6%, divided equally between the two brokers. This means that if your house goes for $300,000, the typical commission will come to $18,000.
Title fees: 0.62%
During the title search, a title firm analyses the public records to ensure that the seller officially owns the house and there aren’t any claims against it.
Usually, both sellers and buyers in Texas pay for their own title company.
Outstanding amounts owed on the property
As a seller, you will have to pay for any unsettled payments on your house, which can entail utility bills and homeowner’s association fees. All these costs will be prorated to your closing date.
Home Warranty Fees
Buyers make a huge investment when they buy a property. This is a major reason they might need some assurance. A home warranty is a policy that covers all appliances in the house, such as a washer, dryer, refrigerator, etc.
This assures the buyer that such appliances are in good condition. If something goes wrong with the appliances, then the warranty will cover the repairs.
A home warranty makes it less costly if the gadgets stop functioning during the warranty period. In Texas, the average cost of a home warranty comes between $450 and $850.
Property Taxes make up a big part of the seller closing costs in Texas. As property taxes in the state are paid in arrears, you will owe the government taxes for the part of the year that the property was yours. For instance, if you sell the house in August, property taxes from January to August will be owed you.
The average property tax in Texas comes at around 1.8% of the house’s total value. This is some of the highest in the nation.
Texas Recording fees
Your county will levy a small fee to maintain a legal record of your house’s mortgage and deed information. This fee can slightly differ based on the location, but on average, it comes to around $750 in Texas. Sellers can negotiate with their buyers on who will cover this expense.
Municipal Lien Search
A city can place liens on a house for code violations, structures that were constructed without necessary approvals, and so on. A municipal lien search identifies such violations so the seller can resolve them before closing. Both parties can split this cost.
Escrow fees are fees you pay to an escrow firm to hold and transfer money in a real estate transaction. Both seller and buyer will have to pay for this service to a mortgage lender or an escrow company that holds the money.
The buyer deposits the sum into an escrow account held by the company once they have committed to a purchase. Once the deal happens, the seller will get the sum and sign over the house to the buyer.
Escrow assists sellers and buyers in avoiding fraud, ensuring that the money safely exchanges hands at the closing.
These are some of the major closing costs a seller has to pay in Texas. If you do not have a sound understanding of the seller closing costs in Texas, then you may end up shelling out more than you need to. It is ideal to consider several closing costs before determining the listing price.
You can use a closing cost calculator to better understand how much money you will take home after the real estate deal is done.
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