Is Everything Really Bigger In Texas? A Look At Closing Costs In The Lone Star State

They say everything’s bigger in Texas, but is that adage true when it comes to closing costs?

Before we attempt to answer that question, let’s take a look at the state of closing costs nationally. For purchasing a single-family property in the U.S., closing costs—which include lender’s title, owner’s title, appraisals, settlement service fees, recording fees, land surveys, and transfer taxes, where applicable—averaged $5,779 including taxes and $3,344 excluding taxes in 2018, according to the latest ClosingCorp Closing Costs Data Report. Broken down, this comes to $1,232 for lender’s title, $501 for owner’s title, $521 for appraisals, $891 for settlement service fees, $200 for recording fees, and $2,434 for transfer taxes. Total fees, including taxes, represented 1.96 percent of the average home sale price.

To calculate average closing costs, ClosingCorp used home price data from CoreLogic, a leading global property information provider, to create a $100,000 home sale price range, and then compared real, market-specific rates and fees from the 1.5 million purchase transactions that went through its fee platform to get a sense of what is really happening at the national, state, and local level.

The states with the highest average closing costs, including taxes, were the District of Columbia ($24,613), followed by New York ($13,581), Delaware ($13,309), Washington ($12,667), and Maryland ($11,395). Excluding taxes, the District of Columbia ($5,694) and New York ($5,586) kept their top spots, followed by Hawaii ($5,318), California ($5,284), and Washington ($4,701).

The states with the lowest average closing costs were Missouri ($1,887 including and excluding taxes), Indiana ($2,002 including and excluding taxes), South Dakota ($2,149 including taxes and $1,995 excluding taxes), Iowa ($2,248 including taxes and $2,011 excluding taxes), and Nebraska ($2,267 including taxes and $1,919 excluding taxes).

So, where does Texas fall? Just as it does on a map of the United States—somewhere in the middle. Closing costs in the Lone Star State totaled, on average, $3,771, or 1.42 percent for homes with a sale price range between $200,000 and $300,000. This breaks down to $1,644 for lender’s title, $300 for owner’s title, $529 for appraisals, $677 for settlement service fees, $178 for recording fees, and $443 for land surveys. It should be noted that Texas is one of just two states that requires land surveys (the other is Florida).

A few core-based statistical areas (CBSAs) were above the state’s average. In Dallas-Fort Worth-Arlington, closing costs averaged $4,409 and, in Midland, they averaged $4,377. However, since home sale prices ranged between $300,000 and $400,000 in these CBSAs, those amounts still represent 1.42 percent of home sale price. And in Austin-Round Rock-Georgetown, where this month’s MBA Annual Convention & Expo is being held, closing costs totaled, on average, $4,267, or 1.19 percent for homes with a sale price range between $300,000 and $400,000. 

In the CBSAs where closing costs were below the state average, home sale prices ranged between $100,000 and $200,000. The three CBSAs in Texas with the lowest average closing costs were El Paso ($2,962, representing 1.70 percent of the average home sale price), Beaumont-Port Arthur ($3,089, representing 1.85 percent of the average home sale price), and Killeen-Temple ($3,089, representing 1.73 percent of the average home sale price).

Interestingly, there were a few CBSAs where closing costs represented more than two percent of the average home sale price. In McAllen-Edinburg-Mission, closing costs averaged $3,357, or 2.59 percent of the average home sale price of $129,811. In Brownsville-Harlingen, closing costs averaged $3,155, or 2.35 percent of the average home sale price of $134,396. In both of these areas, the average home price is well below the state average. While some of the closing costs are low as well, such as lender’s title and owner’s title, other costs, such as land surveys and recording fees, are actually well above average the state average. And in Waco, closing costs averaged $3,972, or 2.02 percent of the average home sale price. While some may blame the popular HGTV series Fixer Upper, which is filmed in Waco, for this, the uptick is actually due to land surveys, which average $1,137, approximately 157 percent more than the state average.

While closing costs in Texas appear to be below the national average, that could change. Various jurisdictions continually contemplate increases and adjustments. So, it’s critical for lenders, no matter what state they originate in, to educate their borrowers as early as possible on closing costs. This transparency helps set reasonable expectations and leads to a positive borrower experience.