Who Pays Closing Costs in Texas: Buyer, Seller, and Shared Items

In a Texas home sale, both the buyer and the seller pay closing costs, and who pays what is set by the purchase contract rather than by state law. Buyers generally spend 2% to 6% of the purchase price on loan-related and property-verification fees. Sellers often spend 6% to 10% once agent commissions and the owner’s title policy are included. Every line is negotiable up to the moment the contract is signed.

The Contract Decides, Not State Law

Almost every residential resale in Texas uses the One to Four Family Residential Contract (Resale) published by the Texas Real Estate Commission.¹ Licensed agents are required to use the form, and Paragraph 12 is where settlement expenses are split: it lists costs the seller agrees to pay, costs the buyer agrees to pay, and two sub-provisions where the seller can agree to contribute toward the buyer’s brokerage fees or other buyer expenses.²

Texas law does not assign any particular closing cost to any particular party. What follows is the customary split — what buyers and sellers usually pay when nobody renegotiates — but any item in that split can be moved by writing it into the contract.

What the Buyer Pays

The buyer’s side of the settlement statement is built around the mortgage. The lender charges fees to underwrite the loan and insists on independent verification that the property is worth what the buyer is paying for it. Typical buyer-side costs include:

Loan origination fee, commonly 0.5% to 1% of the loan amount.
Appraisal, ordered by the lender to confirm the property’s value.
Survey, done by a licensed surveyor to confirm boundaries, easements, and any encroachments.
Credit report fee.
Lender’s title insurance policy, which protects the lender’s interest and is separate from the owner’s policy.
Recording fees for the new deed of trust at the county clerk’s office.
Home inspection, usually paid privately during the option period before closing.
Initial escrow deposit to fund the account the lender will use to pay future tax and insurance bills.

What the Seller Pays

The seller’s biggest line is real estate agent compensation. Total commissions in Texas have historically averaged around 5% to 6% of the sale price. Since the 2024 National Association of Realtors settlement, sellers and buyers negotiate agent fees separately, and sellers are no longer required to offer compensation to a buyer’s agent through the MLS. The updated TREC contract keeps a specific blank in Paragraph 12A(1)(b) where the seller can still agree to contribute toward the buyer’s brokerage fees if they choose.²

Beyond commissions, sellers customarily cover:

The owner’s title insurance policy, which protects the buyer against undisclosed title defects.
Recording the release of the seller’s existing mortgage.
Preparation of the warranty deed by an attorney or title company.
Tax certificates confirming the status of property taxes owed.
HOA resale and disclosure documents, if the property sits in an association.
Settlement agent fees charged by the title company for coordinating closing and disbursing funds.

Title Insurance: A Texas Peculiarity

Texas is one of the few states where title insurance premiums are set by a government agency instead of the market. The Texas Department of Insurance publishes a mandatory rate schedule that every title company must follow, so shopping for a cheaper premium is not an option — the price is the same everywhere.³

By Texas custom, the seller pays for the owner’s policy and the buyer pays for the lender’s policy. When the two policies are issued at the same closing, the lender’s policy usually qualifies for a discounted simultaneous-issue rate.

Shared Costs: Property Tax and HOA Proration

Property taxes in Texas are billed once a year, so a mid-year sale leaves both parties owing a share. The owner of record on January 1 is personally liable for the full year’s tax bill, even if the home sells later that year.⁴ To keep that from falling entirely on the seller, the TREC contract prorates taxes at closing.

The settlement agent divides the annual bill by 365, multiplies by the number of days the seller owned the home that year, and credits that amount to the buyer. Because the final bill may not be issued yet, the calculation uses the most recent figures available, and the contract may require a true-up after closing if the actual bill comes in higher or lower.

HOA dues work the same way. If the seller prepaid, the buyer reimburses the portion covering days after closing. If dues are unpaid, the seller credits the buyer.

Seller Credits Toward Buyer Costs

Paragraph 12 lets the seller agree to pay a set amount toward the buyer’s closing expenses, which comes off the buyer’s cash to close on the settlement statement. The contract now separates this into one blank for buyer brokerage fees and another for other buyer expenses such as loan fees, title charges, and prepaid items.²

However generous the seller is willing to be, the buyer’s lender will cap how much of that contribution it will accept. Going over the cap can derail the loan, so both sides should confirm the limit before signing. The maximum depends on the loan program:

Conventional (Fannie Mae): 3% of the sale price if the down payment is under 10%, 6% between 10% and 25% down, and 9% at 25% or more down. Investment properties are capped at 2% regardless of the down payment.⁵
FHA: up to 6% of the sale price toward closing costs, prepaid expenses, and discount points.⁶
VA: seller concessions capped at 4% of the home’s reasonable value, though the VA does not separately limit credits applied directly to the loan’s closing costs.⁷
USDA: up to 6% of the sale price, and as of May 2024 real estate commission fees are excluded from that cap.⁸

One Buyer Obligation Specific to Foreign Sellers

If the seller is a foreign national or non-resident, the buyer carries a federal duty to withhold 15% of the amount realized on the sale and send it to the IRS.⁹ The withholding is reported on IRS Form 8288, which must be filed within 20 days of closing.¹⁰ The title company usually handles the paperwork, but the legal responsibility sits with the buyer.

An exception applies when the sale price is $300,000 or less and the buyer is an individual who plans to use the home as a primary residence for at least half the days it is occupied in each of the first two years after closing — no withholding is required.¹¹ For sales above $300,000 but not more than $1,000,000 where the buyer will use the property as a residence, the rate drops to 10%.

Check the Closing Disclosure Before You Sign

The lender must deliver a Closing Disclosure at least three business days before closing.¹² It itemizes every fee, credit, and proration on both sides of the deal. Read it against your Loan Estimate: the loan terms and most fees should match or come very close. If Paragraph 12 of your contract has the seller contributing toward your costs, confirm the credit shows up and the dollar amount is right. Raise any discrepancy with the title company before closing day, not at the table.

1
Texas Real Estate Commission. One to Four Family Residential Contract (Resale)
2
Texas Real Estate Commission. Clearing Up Compensation Confusion, Water Disclosure Discussion, and More BLC Recap
3
Texas Department of Insurance. Texas Title Insurance Premium Rates Effective March 1, 2026
4
Williamson County, TX. Responsibility and Tax Code
5
Fannie Mae. Interested Party Contributions (IPCs)
6
U.S. Department of Housing and Urban Development. What Costs Can a Seller or Other Interested Party Pay on Behalf of the Borrower
7
Veterans Affairs. VA Funding Fee and Loan Closing Costs
8
U.S. Department of Agriculture. 2026 USDA Explanatory Notes – Rural Housing Service
9
Internal Revenue Service. FIRPTA Withholding
10
Internal Revenue Service. Instructions for Form 8288
11
Internal Revenue Service. Exceptions from FIRPTA Withholding
12
Consumer Financial Protection Bureau. Closing Disclosure Explainer