After going through the lengthy process of purchasing your dream home, the excitement of receiving your new home keys is undeniable.
However, it is crucial to consider the additional expenses known as “closing costs” that come with the final steps in any real estate transaction.
These fees can come as a surprise to homebuyers and sellers who are unfamiliar with the process.
Since you are here right now, you may be wondering what closing costs are. You may also be curious about who bears these additional expenses.
You might have asked yourself: If I want to live in Richardson, TX, who is responsible for paying the closing costs? Is it me as the buyer or the seller?
In this article, we will unravel the ins and outs of closing costs in Richardson, TX, and shed light on essential considerations for homebuyers and sellers during real estate transactions.
We will cover everything you need, from understanding the different expenses involved to identifying who typically assumes the responsibility for paying these costs!
What is the Closing Cost?
Closing or settlement costs refer to all the fees the buyer and seller are required to pay during the closing or settlement of a house purchase.
The procedure runs smoothly because third-party services, such as an escrow or title company, oversee the closing process and are reimbursed for their efforts.
But the question is, who pays closing costs in Richardson, TX? Is it the buyer or the seller?
Typically, buyers bear most of the closing costs. However, sellers also contribute to some of these expenses.
The answer of who pays Richardson, TX closing costs depends on the negotiation of both parties during the real estate transaction.
Usually, buyers and sellers both have responsibilities for the overall cost. Let’s look closer at the typical closing costs you will encounter in a real estate deal.
Buyer's Responsibilities for Closing Costs in Richardson, TX
The average closing cost in Texas falls around $2,186. However, note that this number doesn’t include additional expenses like title insurance, taxes, and other fees.
So, be prepared for possible additional costs in the future. As mentioned, the buyer usually pays for the majority of closing costs in a real estate transaction.
While buyers and sellers can negotiate the total closing cost, it is necessary to understand the typical responsibilities that buyers in Richardson, TX, may have when it comes to closing costs.
Here are some expected closing costs that buyers may be responsible for:
|Loan Origination Fees|
Usually 1% of the total mortgage amount.
However, the exact percentage can be subject to negotiation based on the level of risk associated with the loan and if the borrower is credible.
|Buyers are typically responsible for various loan-related fees, including loan origination.|
|Credit Report Fee||$50 to $60||Your lender will check your credit to determine if you qualify for a loan.|
|Title Insurance and Title Search|
Typically around 0.54% of the home's final sale price, though most title companies use a tiered pricing system.
Meanwhile, a title search can typically range from $75 to $100.
Title insurance is a special kind of protection provided by title companies. It helps safeguard against potential financial losses caused by property ownership history problems.
It includes unpaid debts, taxes, mortgages, or legal issues from previous owners. Furthermore, a title search is vital to guarantee the property is free and clear of liabilities.
It also ensures that no one has a claim on the asset due to unpaid dues, legal suits, or other circumstances.
|Appraisal Fee||Lenders typically require these fees, ranging from $300 to $500, depending on the property's size, location, and type.|
Buyers usually pay the appraisal fee for hiring a professional appraiser that evaluates the property's value.
It is advisable to obtain an appraisal even if the lender does not require it, as it provides an accurate understanding of the property's fair market value.
It also helps to ensure that you only pay what is necessary.
|Inspection Fees||$350 on average, but may vary with service providers.|
Escrow fees, which cover the services supplied by the escrow company or attorney participating in the transaction, can be charged to buyers.
This fee ensures that funds and documents are handled safely during closing.
A lender might require a buyer that gets a loan to pay costs like property taxes, HOA dues, homeowner's insurance premiums, or rental property insurance in advance.
The estimate for this fee is usually given to the buyer up to three days after applying for a loan.
|Recording and Transfer Fees||The recording fee for Collin and Dallas County, where Richardson, TX, is nestled, typically ranges between $16 and $22, respectively, with an additional cost of $4.|
Recording fees are expenses charged by the local agencies or state for registering the transfer of property ownership.
As for the transfer fee, fortunately, Texas does not impose any taxes or fees on real estate transfers.
However, it is still essential to be familiar with this fee to be financially ready for closing costs.
Seller's Responsibilities for Closing Costs in Richardson, TX
|Real Estate Agent Commissions||Average in Texas is 5.75% to 6%||Real Estate Agent Commissions are typically negotiated as a percentage of the sale price between the listing agent and seller.|
|Title Insurance||Around 0.54% of the home's final sale price.|
Title insurance ensures the buyer has clear property ownership and protects them from potential title issues.
Although buyers typically pay for their title insurance in Richardson, sellers can offer to cover the cost of title insurance if they ought to incentivize a buyer.
|Prorated Property Taxes||Varies||The seller is also responsible for paying their portion of the property taxes until closing. The cost for this fee is calculated based on the days the seller owned the home.|
|Outstanding Liens and Judgments||Varies||If there are any unsettled liens or judgments against the property, the seller is generally responsible for clearing them before the sale is finalized.|
|Homeowner Association (HOA) Fees|
HOA fees usually range between $200 and $500.
The cost may vary depending on each neighborhood homeowner’s association.
|If the property sold by the seller is part of a homeowner association, the seller may need to pay any outstanding HOA fees or assessments.|
|Documentary Stamps or Transfer Taxes||Varies||In Texas, sellers are responsible for paying the transfer taxes associated with the property transfer to the buyer.|
|Settlement Fees||Often range from $350 to $600|
While Texas doesn't require an attorney to be present at closing, a settlement fee is still associated with the services provided by the title company or escrow company on closing day.
This fee covers the costs of facilitating the closing process and ensuring a smooth transfer of ownership.
Negotiating Closing Costs in Texas
Closing costs are an unavoidable aspect of real estate transactions.
While some closing costs are typically non-negotiable, there are times when the seller and buyer can negotiate what to pay and how buyers can reduce their closing costs.
Here are some tips to help you minimize your total closing costs at the end of the deal:
|1||REVIEW the Closing Cost Estimate|
Review thoroughly the closing cost estimate provided by your lender or the title company to understand the breakdown of the various fees and expenses involved in the transaction.
Specify the things that seem excessive or unclear to you, then discuss them with your real estate agent or attorney.
|2||MAINTAIN a pleasing Credit Score|
An excellent credit profile can help you secure a lower interest rate when applying for home financing.
You can save dollars over the lifetime of your mortgage by maintaining your credit score in great shape!
|3||SHOP for Different Service Providers|
Some closing costs include services like title insurance, surveys, appraisals, and inspections.
You can shop around and get quotations from several service providers to discover the best deals.
Keep in mind, however, that some services, such as title insurance, may be regulated by the state and have defined rates.
|4||NEGOTIATE with the Seller|
As a buyer, it is important to be proactive and open to negotiation when it comes to closing costs.
Especially in a buyer's market where sellers are motivated to make a sale, you can confidently propose terms to the seller regarding who pays for what.
For instance, if you are planning to submit a full-price offer on their house, you have the opportunity to request that the seller covers a portion of your entire closing costs.
This negotiation can alleviate some of the financial burden associated with the transaction and potentially save you money.
Remember to confidently approach the negotiation process and be prepared to provide a compelling case for why the seller should consider your request.
Working closely with your realtor or attorney can also provide valuable guidance in navigating this negotiation to achieve a favorable outcome for both parties.
|5||NEGOTIATE with Your Lender|
While the lender's fees are generally non-negotiable, you can discuss the loan terms and see if there could be any adjustments to reduce the overall costs.
You can ask if a lower interest rate is possible or explore different loan programs with lower fees attached.
Limitations on Seller Concessions in Richardson, TX
We’ve already covered the typical expenses associated with a real estate transaction, which is typically responsible for them, and strategies for reducing these costs.
However, there is one more important thing to understand, seller concessions.
A seller concession, also known as a seller contribution, refers to a situation where the seller agrees to pay a specified amount toward the buyer’s closing costs.
When homeowners want to sell, these are most advantageous in a buyer’s market. However, buyers may need to agree to a higher purchase price.
If the seller agrees, they can cover closing costs, such as property taxes, title insurance, loan origination fees, inspection fees, recording fees, appraisal fees, attorney’s fees, and discount points.
But note that there are limitations on seller concessions in Richardson, TX. Remember that the seller’s contribution towards closing costs cannot exceed your closing fees.
For example, if you purchase a $200,000 home with a conventional loan, you have a 20% down payment and a mortgage amounting to $160,000.
The seller can cover up to $9,600 in the given scenario, assuming a 6% closing cost.
However, if your actual closing costs for the mortgage only amount to $5,000, the seller can only provide up to $5,000 in seller concessions.
Why is there a Limit for Seller Concession?
Without limitations, sellers could inflate local housing prices and potentially lead to inaccurate appraisals and challenges with securing financing.
If other sellers or agents see the rising home price, another home will match the inflated market value.
It will cause home prices and rent to increase to unsustainable levels. Such an event can be avoided by limiting the seller’s coverage of their home’s value to closing costs.
By understanding the closing cost in Richardson, TX, buyers and sellers will be ready for the additional expenses associated with a home deal and ensure a smoother closing process.
In Richardson, TX, buyers are generally responsible for most closing costs, including loan origination fees, credit report fees, and title insurance.
Buyers also cover appraisal fees, inspection fees, escrow fees, prepaid expenses, and recording fees.
On the other hand, sellers typically bear the burden of real estate agent commissions, title insurance, prorated property taxes, outstanding liens and judgments, HOA fees, documentary stamps or transfer taxes, and settlement fees.
Negotiating closing costs is possible and can be beneficial for both parties.
The seller can cover some costs the buyer will pay, but note that there are limitations on seller concessions, and the seller’s contribution cannot exceed the buyer’s closing fees.
Buyers and sellers in Richardson, TX, can navigate the real estate transaction process more effectively by understanding the responsibilities and limitations of closing costs.
Consulting with real estate professionals can provide relevant guidance and help ensure a smooth and transparent closing process.
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Frequently Asked Questions
The responsibility for paying the closing costs is negotiable in Richardson, TX.
Both seller and buyer will usually share the closing costs. The specific price to pay is determined during the negotiation process outlined in the purchase agreement.
Usually, the seller is responsible for the property tax balance that accrued from the start of the tax year to the day of closure.
Meanwhile, the buyer is responsible for property taxes that are payable from the time following the closing date.
Although this is one of the costs buyers usually pay, both parties can negotiate this fee. Either one party will bear all, or they can split the cost evenly.
In Texas, the seller usually pays title insurance, which protects the buyer’s ownership rights.
However, note that it is negotiable, and the buyer and seller can agree to different arrangements regarding the payment of the title policy premium.