Closing costs vary from state to state. And in Texas, they can vary from sale to sale. It may be surprising to see where you can and cannot save on your real estate sale or purchase.
In Texas, title insurance rates are set by the Texas Department of Insurance. The rate is based on the sales price of the property. Many buyers and sellers believe that shopping around for a title company will save them money. But, title companies must charge the rate mandated by the state.
However, there are still some ways to save on your closing.
How to save on your closing costs:
- Provide a valid and usable survey. The cost of a new survey for a typical Dallas property can run $450 to $650. If the seller can provide a good survey and survey affidavit, then it can save buyer or seller the expense of a new one.
- Don’t have an HOA. Properties with mandatory homeowner associations require a resale certificate and often have transfer fees. I’ve seen these range from zero to $1,200.
- Don’t use a Power of Attorney or Mobile Notary Service. The POA must be filed and recorded with the paperwork and incurs recording fees. If the title company has to hire a mobile notary to close at your location, they may pass the $150-250 expense on to you.
- Pay cash for the property. This saves on lender required title policy endorsements and lender fees. You’ll also save the cost of recording the mortgage lien with the courthouse.
- Lower the Sales Price – The lower the sales price, the lower the title insurance. To save on the title insurance, you could reduce the sales price and make up the difference with the buyer paying some of the seller’s closings costs. For example, the title policy for a $205,000 cash sale is $1,457. If the price was lowered to $200,000, the policy would be $1,429. It could save $28 if the price was reduced from $205k to $200k and the buyer could pay $5,000 of the seller’s closing and moving expenses to account for the difference. Be careful though. It could make the deal more complicated than it’s worth and end up costing you more.
- Shop for your mortgage. Lender fees vary for the application, processing, credit report, appraisal, flood certificate, etc. Consider rolling the lender fees and into your mortgage. Some buyers prefer to pay points or higher lender fees at closing to reduce the interest rate on their mortgage. In exchange for the increase in upfront costs, it usually saves them money in the long run. If you’re willing to increase your mortgage interest rate, you may save on lender closing fees.
- Avoid paying for mortgage insurance by putting at least 20% down on the property.
- Don’t escrow your taxes and insurance costs into your mortgage payments and you can avoid paying for those expenses in advance. But be sure to have the discipline to pay them annually outside of your monthly mortgage payments.
- Compare escrow/closing/settlement fee and the attorney fees for preparing documents, deeds, etc. These fees can vary between title companies. However, they are typically within $25 to $200 of each other. I’ve seen escrow fees at one title company that were $100 lower than the competition, but their doc prep fees were $150 higher than the other guys.
Where you can’t save on your closing costs:
- Title insurance policies cost the same across Texas. Title companies cannot legally reduce or increase their rates for you.
- Courier/FedEx fees. Sorry, but we can’t let you deliver the signed documents to the mortgage company, courthouse, etc. Our fiduciary duties to all parties exceed our trusting you with these important documents.
- Government fees for recording documents. Counties charge by the page for filing and recording deeds, releases, etc. They don’t discount their fees.
- Home warranty, broker commission, and other items agreed upon in your contracts. If you agreed to pay for these items in the contract, then expect to pay them at closing.
- Taxes. Property taxes are prorated based on how many days of the year each party will own the property. Both buyer and seller must pay their share of the estimated taxes. Typically, the seller’s share of the unpaid taxes are withheld at closing and credited to the buyer to pay when they become due.
The opinions expressed are of the individual author for informational purposes only and not for the purpose of providing legal or tax advice. Contact an attorney or accountant to obtain advice for any issue or problem.
Lydia Blair (formerly Lydia Player) was a successful Realtor for 10 years before jumping to the title side of the business in 2015. Prior to selling real estate, she bought, remodeled and sold homes (before house flipping was an expression). She’s been through the real estate closing process countless times as either a buyer, a seller, a Realtor, and an Escrow Officer. As an Escrow Officer for Carlisle Title, she likes solving problems and cutting through red tape. The most fun part of her job is handing people keys or a check.