Understanding Closing Costs

One of the most confusing parts of the home buying and selling process is understanding the closing costs. There are several fees involved in a real estate transaction beyond just the price of the actual property. Even if you have the full purchase amount in cash, there are still fees to be paid. This section will give you a more detailed idea on how closing costs are actually broken down and what each one means.

Seller's Costs 

In Texas, it is customary for the seller to pay for the following costs:

Owner’s Title Policy: This type of insurance protects the buyer if any disputes arise on the title of the property.

Broker Fees: The fee paid to the listing broker for their services. This amount is usually taken out of the sales price and is split between the listing broker and the buyer’s broker or subagent.

Escrow Fees: This is what the title company charges to handle the transaction. 

Attorney Fees from the Title Company: The cost for an attorney to prepare and review the documents.

Courier & Express Mail Fees: This would be the costs for documents to be sent to specified locations.

Property Taxes: Property taxes for the time the seller is in the home Recording Fees: The cost to file the documents with the county. Survey Fee: The cost of getting a new survey done if needed.

Tax Certification Fee: The fee to be issued a tax certificate which shows current year’s taxes, the last year the taxes were paid and any delinquencies that need to be collected.

Wire Fee: The cost of distributing funds.

HOA Resale Certificate: The fee required to produce the HOA document showing restrictions, covenants and statement of accounts.

Home Warranty: Repair coverage on the home for usually one year. Read the policy carefully to make sure you understand what it covers.

A Portion of Buyer’s Costs: The buyer may ask the seller to help pay for some of their closing costs. Being open to this might just close the sale.

Buyer's Costs

COSTS In Texas, it is customary for the buyer to pay for the following costs:

Loan Fees: These are lender fees and might include an application fee, origination fee, points, etc.

Down Payment: The amount you need to pay up front as part of your mortgage. Usually 3% to 20% of the sales price.

Escrow Account Set-Up: The cost to set up an escrow account where your property insurance and pre-paid taxes will be kept.

Property Insurance: Home owner’s insurance that can be rolled into your loan and paid from an escrow account.

Prorated Property Taxes: If the seller has already paid this year’s property taxes then you must reimburse them for the part of the year you will be owner of the property.

HOA Transfer Fee: The fee to transfer the HOA into the new owner’s name and to provide them with printed copies.

In a real estate transaction many items and fees can be paid by either party if they both agree to it. This is just a list of what is normally covered by the buyer and seller. Your agent will be able to advise you on the possible negotiation of having certain fees paid for by the other party.

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