Understanding Closing Costs
Date Published
Navigating a real estate transaction involves more than just the purchase price—Understanding Closing Costs is crucial for both buyers and sellers. These costs can significantly affect your bottom line, so being prepared is essential.
What Are Closing Costs?
Closing costs are the various fees and expenses paid at the end of a real estate transaction, separate from the property’s purchase price. Both buyers and sellers have their own sets of closing costs, which can include lender fees, title insurance, taxes, and more. In Texas, buyers are typically informed of all transaction fees at least three business days before closing.
Typical Closing Costs for Buyers
For buyers in Texas, closing costs generally range from 2% to 5% of the purchase price, with a common estimate being about 3%. These costs may include:
- Loan origination fees
- Appraisal and credit report fees
- Title search and insurance
- Survey fees
- Prepaid property taxes and homeowner’s insurance
- Escrow fees
Buyers should be prepared for these expenses, which are paid in addition to the down payment. Many are surprised by the number and amount of these costs, so using a closing cost calculator can help estimate the total amount due.
Typical Closing Costs for Sellers
Sellers in Texas tend to pay 6% to 9% of the sale price in closing costs, with the largest portion often being the real estate agent’s commission. Other seller costs can include:
- Title insurance
- Escrow and recording fees
- Property taxes (prorated to closing date)
- HOA fees (if applicable)
On a typical home sale in Waco, commissions alone can reach up to $16,000, making it vital for sellers to budget accordingly.
How to Prepare for Closing Costs
Both buyers and sellers should review all estimated closing costs with their real estate agent or lender early in the process. Buyers can use online calculators to get a ballpark figure and may be eligible for assistance programs to help cover some costs. Sellers should factor commissions and fees into their expected net proceeds from the sale.
Conclusion
Understanding closing costs is a key part of a smooth real estate transaction. Whether you’re buying or selling, being informed and prepared will help you avoid surprises at the closing table. The Onward Real Estate Team is here to guide you through every step and ensure you’re ready for all the costs involved.