Who is picking up the tab?
Whether you are buying or selling a home there are typical costs associated with your individual closing that should be expected on your closing disclosure; there are also costs that you can negotiate who will “pick up the tab” or even split the cost of. Realtor fees, Mortgage payoffs, Mortgage Origination Fees, and Earnest Money are apart of these typical seen costs, but they do not typically trade sides of the transaction. We will expand on a few of these below to know who should expect to see these on their side of the table. These fees can also vary by state as well, so if you are not in Texas be sure to check if our Texas norms are also your norms!
SELLERS
Typical fees that you will see on your closing disclosure while selling a home in Texas are: Mortgage Payoffs, Closing Costs, Property Taxes, and potentially Property Gains. Typically the largest line item you will see on your disclosure will be if still owe a mortgage. The Title company will make sure that this is coordinated with whoever hold your current mortgage so you are free and clear after funding. If you do not have an escrow, you will see Property Taxes and even HOA payments due up to the day of closing. This means that if you close on April 30th you will have a prorated amount from January 1- April 30th due and the rest due will be paid by the buyer. Property gains (also known as Capital Gains) in Texas are due in full at closing. Capital Gains Tax is a tax on the profit when you sell an asset that increased in value while you held it. To clarify, it’s the gain that’s taxed, not the amount of money you receive. This is for investment properties, and applies as a “penalty” for selling a house before living in it for 2 years. This is because you won’t qualify for the capital gains tax exemption, and will have to pay a capital gains tax on any profit.
The big question is always: “WHO PAYS THE AGENTS”
In Texas, Realtor commissions are typically paid by the seller. You are paying someone a service to market and sell your property for a negotiated percentage (typically 6%) of the homes sale price. This is then split between the buyer’s agent’s brokerage and the seller’s agent’s brokerage; so the price you see on Selling Sunset as the “commission” is not what goes into the agent’s pockets. In transparency, if the full percent agreed upon is 6% that number is split at the brokerage level and then split again before the agents are paid.
BUYERS
Let’s switch over to buyers. When you purchase a home in Texas you can expect to see: Earnest money, closing costs, mortgage origination fees, Appraisals, and Home inspection Fees. One big difference between associated fees for buyers and sellers would be that the expected fees for a buyer start once you are under contract. This starts with the Earnest money; this amount is typically 1-2% of the sales price and is deposited with the Title company within days of an accepted contract. The next fee are any inspection fees (general, pool, HVAC, roof, etc) these are typically paid quickly as well in order to understand the property fully before moving into the final stages of purchasing. The final few costs are associated with final closing costs and will be reflected on Closing Documents; these include Mortgage origination fees, Appraisal fees, and any prorated fees.
It is hard to break down a “typical closing cost” since so much goes into these. Your loan type, your credit score, your loan to value ratio (how much you put down vs how much you borrow) and who is responsible for any of the many negotiated costs in a contract. To add a kicker to the process, these negotiated areas are all effected by the housing market.
NEGOTIATED COSTS
The Texas sales contract offers many opportunities to negotiate typical fees. These range from which side purchase the Title Insurance and survey, to who pays for the optional items of Home warranties, Sellers Concessions, and Repairs. These costs make up thousands of dollars within a transaction and can heavily influence the amount of closing costs one side is covering – and for buyers this amount can make a HUGE difference on deciding if you can purchase the new couch or not (ha!) All jokes aside, this is where working with the right agent is crucial. Knowing how to navigate and skillfully construct a contract is where an agent stands out from others, and frankly earns their commission.
So as always, if you are looking for your own trusted agent in Texas , I would love to meet for coffee (or your choice of beverage) to discuss how I can be that for you!
