Recently released national closing cost data showed that in 2020 closing costs increased for both purchases and refinance transactions. Average closing costs for a single-family home increased by almost 6 percent while the average home sales prices increased by almost 10 percent.
The closing cost data, announced by ClosingCorp, calculated the cost of title insurance, appraisals, settlement fees, recording fees, surveys, and transfer taxes. We don’t have transfer taxes in Texas.
Last year, the average U.S. home price increased by about $30,000, however, the average purchase closing costs increase was only $339 including taxes. The report contributes much of the rise in home sales to record low interest rates and a rapid shift to remote work. It attributes the smaller rise in closing costs to increased use of technology and cost controls.
How Does Texas Compare?
The average closing costs in Texas were $3,753.65 with an average sales price of $266,667. The average closing costs in Texas were 1.41 percent of the sales price, an actual decrease in closing costs. That put Texas ranked 27th in the country for closing costs based on the percentage of the sales price.
The states with the highest average closing costs, including taxes, were Washington, D.C., Delaware, New York, Maryland, and Washington. That is a reflection of both closing costs and average sales prices being high. If you look at the highest closing by state based solely on the percentage of sales price, the highest states were Delaware, Pennsylvania, Washington, D.C., Maryland, and New York. Their percentage averaged more than double the closing costs in Texas.
Shopping Around
In most states, consumers can shop around and compare closing costs like they would a mortgage loan or homeowner insurance. Title insurance rates often vary based on several factors such as the purchaser’s credit scores or amount of their down payment. The escrow, legal, and closing fees can even vary from county to county within a state.
However, in Texas and Florida, the cost of title insurance is set and regulated by the state. All Texas title companies are required to charge the same for a title policy. In some states, the title insurance premiums are lower than Texas, however the other closing costs are higher and result in high total closing costs to the consumer. This report takes additional fees into consideration (not just title insurance) when looking at the total closing costs.
Is Deregulation The Answer?
The debate comes up every few years that Texas title insurance should be unregulated. The argument is usually that the free market and more competition would help reduce the cost to the consumer. It’s interesting to note that Florida and Texas — the only states with title insurance fees regulated by their state — rank sixth and 27th, respectively, for closing costs as a percentage of the sales price.
