Who Pays What at Closing on a Texas Home

Texas closing costs are not settled by local custom. The contract most resale deals run on — TREC form 20-19, the One to Four Family Residential Contract (Resale) — names, line by line, which expenses belong to the seller and which belong to the buyer. Paragraph 12A opens by saying the listed expenses “must be paid at or prior to closing,” and then gives each side its own list.

What trips people up is rarely the total. It is that several of the largest items on the page are not fixed rules at all but blank boxes the two sides fill in when the offer is written, and that two of the sums a buyer wires early are not costs in any real sense.

Here is how the split actually works, paragraph by paragraph, so you can read your own contract instead of taking anyone’s word for it.

Which contract you are reading matters first

Everything below describes TREC form 20-19, effective July 1, 2026. It is the form used for resales of houses, duplexes, triplexes and fourplexes.

It is not the form used for a condominium, which has its own promulgated contract. Builders commonly hand you their own paperwork rather than a TREC form, and the cost allocation in it can look nothing like this — but TREC does promulgate New Home Contract forms 23-19 (incomplete construction) and 24-19 (completed construction), which are worth reading beside whatever a builder gives you so you can see what has been moved.

What the seller pays

Paragraph 12A(1)(a) assigns the seller “releases of existing liens, including prepayment penalties and recording fees; release of Seller’s loan liability; tax statements or certificates; preparation of deed; one-half of escrow fee; and other expenses payable by Seller under this contract.”

Read as a group, those are the costs of handing over clean title: paying off and releasing what is recorded against the property, getting a deed drafted, proving the taxes stand where the contract says they do, and splitting the escrow fee.

Then comes 12A(1)(b), which is where seller concessions live. It is a blank for “an amount not to exceed $____” to be applied to the buyer’s expenses. Note the carve-out written into it: that money cannot be applied to brokerage compensation or to the contributions in paragraph 12B. A seller credit and a contribution toward a broker are two different instruments in this contract, and they are filled in separately.

What the buyer pays

The buyer’s list in 12A(2) is much longer, and it sorts into four groups.

Getting the loan. Appraisal fees, loan application fees, origination charges, credit reports, preparation of loan documents, underwriting, courier and wire fees, and private mortgage insurance, a VA funding fee or an FHA mortgage insurance premium where the lender requires one.

Protecting the loan. The loan title policy with whatever endorsements the lender demands, loan-related inspection fees and a final compliance inspection. The loan policy is the lender’s protection, not yours; the owner’s policy is the one that insures your title, and it sits in a different paragraph.

Funding the escrow account. This is the group most commonly misunderstood, and the contract states it plainly: “all prepaid items, including required premiums for flood and hazard insurance, reserve deposits for insurance, ad valorem taxes and special governmental assessments.” You are not being charged a fee here. You are pre-funding an account the servicer will spend on your behalf, months before the first bill arrives.

Paperwork, the shared fee and two open ends. Recording fees, copies of easements and restrictions, photos, amortization schedules, repair inspections, interest from disbursement to one month before the first payment, and the other half of the escrow fee. The list also closes with two catch-alls — “expenses incident to any loan” and “other expenses payable by Buyer under this contract” — which is why the buyer’s side has no natural ceiling and why an itemized estimate from your lender matters.

The escrow fee split is worth noticing because it is one of the few genuinely fixed allocations on the page. Each side pays half unless the parties write something different.

Large costs that are checkboxes, not rules

Ask around and you will be told “the seller pays for the owner’s title policy in Texas.” Sometimes that is what happens. It is not what the contract says.

The owner’s title policy. Paragraph 6A reads “Seller shall furnish to Buyer at [ ] Seller’s [ ] Buyer’s expense an owner policy of title insurance … issued by ________ (Title Company) in the amount of the Sales Price.” Two boxes, one of which someone checks — and a blank naming the title company, filled in at the same moment. The premium itself is not negotiable, because Texas sets title rates, which I wrote about in more detail in this piece on Texas property taxes, title and the option period. Who writes the check for it is. The premium is also not the whole bill: escrow and settlement fees, endorsements, courier and wire charges are set by the company rather than the state, and under 12A(2) you are paying half the escrow fee, so the title company named in that blank is still worth choosing deliberately.

The area and boundary exception. Paragraph 6A(8) is “the standard printed exception as to discrepancies, conflicts, shortages in area or boundary lines, encroachments or protrusions, or overlapping improvements,” and it offers a choice: the exception “will not be amended or deleted from the title policy,” or it “will be amended to read, ‘shortages in area’ at the expense of” the buyer or the seller. Another box. Amending it is what leaves you covered for a fence sitting over a line or a shed protruding onto a neighboring lot, and it generally requires a survey the title company will accept.

The survey. Paragraph 6C gives three options, and there are more decisions inside them than the headline suggests.

Under 6C(1) the seller furnishes an existing survey together with a T-47 affidavit or T-47.1 declaration. If the seller fails to furnish both in time, the buyer obtains a new survey at the seller’s expense no later than three days before the closing date. And if the title company or the buyer’s lender will not accept the existing survey or the affidavit, the buyer again obtains a new one by that same deadline — at the seller’s or the buyer’s expense, depending on which box was checked. That is a fourth checkbox hiding inside the first option.

Under 6C(2) the buyer “may obtain a new survey at Buyer’s expense.” It is permission, not an obligation, and it carries a consequence worth reading twice: if the buyer fails to obtain the survey, the buyer may not terminate under paragraph 2B of the Third Party Financing Addendum because the survey was not obtained. Skipping the survey can quietly cost you a financing out.

Under 6C(3) the seller furnishes a new survey at the seller’s expense. Each option also has a blank for the number of days.

The money you send in the first three days is mostly not a cost

Under paragraph 5A, a buyer delivers both the earnest money and the option fee to the escrow agent within three days after the effective date. They are made payable to the escrow agent and may be paid separately or in one payment. If that third day lands on a Saturday, Sunday or legal holiday, the deadline moves to the end of the next day that is not one. If the contract also calls for additional earnest money later, 5A(3) applies what the escrow agent receives first to the option fee, then to the earnest money, then to the additional earnest money — which matters if a buyer sends a short payment.

What happens to each of them is different.

The option fee buys what paragraph 5B calls the unrestricted right to terminate, exercised “by giving notice of termination to Seller within _____ days after the Effective Date.” The number of days is a blank, negotiated with the offer, and the notice “must be given by 5:00 p.m. (local time where the Property is located) by the date specified.” Terminate in time and the option fee is not refunded, while the earnest money is. The option fee is released to the seller, and under 5A(4), “The option fee will be credited to the Sales Price at closing.” You spend it, and then you get it back as credit if you close.

Earnest money is not spent at all. Paragraph 18B says that at closing it “must be applied first to any cash down payment, then to Buyer’s Expenses and any excess refunded to Buyer.” It is your own money arriving early, and it is one reason the cash figure on your closing statement is usually smaller than the sum of every line above it.

Getting it back when a deal falls apart is less automatic. If no closing occurs, the escrow agent may require a written release of liability signed by all parties before releasing anything, and may deduct authorized expenses. If one side will not sign, the other makes a written demand, and under 18C the escrow agent may disburse if it receives no written objection within 15 days. Budget for the delay, not just the refund.

Two traps sit nearby. Under 5D, if no dollar amount is stated as the option fee, or the buyer fails to deliver it in time, the buyer does not have the unrestricted right to terminate under paragraph 5. Under 5C, if the earnest money is late, the seller may terminate or pursue remedies before the buyer delivers it. The cheapest lines in the deal have the least forgiving deadlines.

Prorations decide who owns which slice of the year

Paragraph 13 prorates “Taxes for the current year, interest, rents, and regular periodic maintenance fees, assessments, and dues (including prepaid items)” through the closing date. In practice the seller’s share of the year’s property tax shows up as a credit to the buyer, because in Texas the bill for the whole year arrives in the fall and is paid by whoever owns the house then.

Two sentences in that paragraph deserve more attention than they get.

First, the proration “may be calculated taking into consideration any change in exemptions that will affect the current year’s taxes.” A seller’s homestead or over-65 exemption does not necessarily carry on for you, so the figure estimated at closing can be built on a smaller taxable value than the one you will actually be billed on.

Second, if the real taxes differ from what was prorated, “the parties shall adjust the prorations when tax statements for the current year are available.” That is a live obligation months after closing, and it is easy to forget it exists. If the first-year tax question is new to you, the property tax post linked above walks through the exemption timing.

Paragraph 13 also closes a gap: if taxes are not paid at or prior to closing, the buyer pays taxes for the current year.

Brokerage compensation sits in the contract now

Paragraph 12B states it directly: “Brokerage compensation is not set by law and is fully negotiable.” Each party pays its own broker under a separate written agreement, and the contract does not change those agreements.

What the contract does provide are two optional contributions. The seller may pay a stated dollar amount or a percentage of the sales price toward the compensation the buyer owes the buyer’s broker; the buyer may do the same toward the seller’s broker. The form is explicit that these contributions “shall be applied to and shall not change the parties’ obligations to pay compensation” under the separate agreements. A contribution moves who funds the fee, not who owes it.

If you are financing with a government-backed loan, read 12C as well. Where a government loan program prohibits the buyer from paying certain charges, the concession in 12A(1)(b) goes first to those prohibited expenses, then to other buyer’s expenses — and not to brokerage compensation or contribution.

VA buyers have their own arithmetic. The Department of Veterans Affairs says it does not limit credits for a loan’s closing costs, but it does limit seller concessions — “anything of value added to the transaction at no additional cost to the buyer,” such as a credit for the funding fee or payoff of the buyer’s debt — to no more than four percent of the home’s reasonable value, the figure on the VA Notice of Value rather than the sales price.

Repairs the lender demands belong to nobody by default

Under paragraph 7E, unless the parties agree otherwise in writing, “neither party is obligated to pay for lender required repairs, which includes treatment for wood destroying insects.”

If nobody agrees to pay, the contract terminates and the earnest money is refunded to the buyer. And if the cost of those repairs and treatments exceeds five percent of the sales price, the buyer may terminate and have the earnest money refunded.

So a termite letter or a lender-mandated roof repair is a negotiation, not an automatic seller expense. It is worth settling in a written amendment rather than discovering it a week before closing.

The exits written into the same paragraphs

Cost allocation is only half of what paragraphs 6 and 7 do. They also give a buyer several ways out, each tied to a deadline.

6B, the title commitment. The seller furnishes a commitment for title insurance within 20 days after the title company receives a copy of the contract, extendable up to 15 days or 3 days before the closing date, whichever is earlier. If it is not delivered within the time required, “Buyer may terminate this contract and the earnest money will be refunded to Buyer.”

6D, objections. A buyer may object in writing to defects, exceptions or encumbrances, but must object by the earlier of the closing date or a blank-filled number of days after receiving the commitment, exception documents and survey. Miss it and the form says the “failure to object within the time allowed will constitute a waiver.” If timely objections are not cured within the 15-day cure period, the buyer has 5 days after that period to terminate and have the earnest money refunded — and a buyer who does not terminate in time is deemed to have waived the objections.

7B, the seller’s disclosure notice. Where the form says the notice has not yet been received, a buyer who never receives it may terminate at any time prior to closing with the earnest money refunded; once it is delivered late, the buyer may terminate for any reason within 7 days after receiving it or before closing, whichever comes first. I have written separately about what that notice asks and does not ask.

Three protections from outside the contract

A seller cannot steer you to a title company. Federal law, at 12 U.S.C. 2608, says no seller of property that will be purchased with the assistance of a federally related mortgage loan may require, directly or indirectly, as a condition of selling, “that title insurance covering the property be purchased by the buyer from any particular title company.” A seller who does it is liable to the buyer for three times all charges made for that title insurance. The protection is tied to that kind of loan, so a cash buyer does not have it — but a cash buyer still fills in the title company blank in 6A, which is where the choice is actually made.

Your numbers have to arrive before closing day. Under the federal mortgage disclosure rules the lender delivers or mails the Loan Estimate no later than the third business day after receiving your application and no later than the seventh business day before consummation, and must ensure you receive the Closing Disclosure “no later than three business days before consummation.” You may also inspect the disclosures during the business day immediately preceding consummation. Be clear about what that three-day rule does and does not cover: only an inaccurate annual percentage rate, a change of loan product or an added prepayment penalty restarts the clock. Other corrected figures may legitimately reach you at or before signing, so the rule protects the terms rather than every number.

There is no transfer tax to budget for. The Texas Constitution, article VIII, section 29, provides that after January 1, 2016, “no law may be enacted that imposes a transfer tax on a transaction that conveys fee simple title to real property.” It does not bar a tax on the issuance of title insurance — but there is no separate percentage-of-price transfer tax at a Texas closing, which buyers moving from other states often budget for out of habit.

A short checklist before you sign anything

• Check which box is marked in 6A for the owner’s title policy, which title company is named in the blank beside it, and whether 6A(8) amends the area and boundary exception.
• Check which of the three survey options in 6C is selected, the number of days written in it, and who pays if the existing survey is rejected.
• Confirm a dollar amount is written in for the option fee, then calendar both the three-day delivery deadline and 5:00 p.m. on the last day of the option period.
• Calendar the title objection deadline in 6D as well; missing it is a waiver.
• Ask whether the tax proration was figured using the seller’s exemptions or yours.
• Read 12A(1)(b) and 12B together so you know what a seller credit can and cannot be spent on.
• Get homeowners insurance quotes for the specific address during the option period, since the first year’s premium and the escrow reserve both land on your buyer’s expenses.
• Compare the Closing Disclosure against the Loan Estimate line by line when it arrives, three business days out.

Ask for the real numbers before you write the offer

An estimate built from a specific address, a specific loan type and the boxes you actually intend to check is worth more than any statewide rule of thumb. Send me the address or the area you are considering and I will put the expense side of it in writing before you are on the option-period clock.

If you are earlier than that and the contract is still some way off, my brokerage, JD Walters Real Estate, keeps a step-by-step walk-through of buying in Central Texas that covers the stages leading up to this one.

Written by Logan Parker, a Texas-licensed real estate agent with JD Walters Real Estate. Reviewed October 1, 2026.

Sources: Texas Real Estate Commission contract form 20-19, One to Four Family Residential Contract (Resale), paragraphs 5, 6, 7, 12, 13 and 18; Texas Constitution, article VIII, section 29; 12 U.S.C. 2608; 12 C.F.R. 1026.19(e) and (f); Texas Department of Insurance title insurance FAQ; U.S. Department of Veterans Affairs, funding fee and closing costs.

This is general information about a promulgated contract form, not legal or tax advice, and contracts can be amended. Read your own contract and addenda, and consult an attorney for your situation.