Market
Who Pays the Escrow Fee When You Buy or Sell a Home in Texas?
In Texas, the buyer and the seller each pay half of the title company’s escrow fee on most home sales. That split is written into the standard resale contract from the Texas Real Estate Commission, in paragraph 12, which lists one half of the escrow fee among the seller’s expenses and one half among the buyer’s. The two sides can agree to change it, and on a VA loan the buyer’s half often moves to the seller.
The fee itself is not large next to a down payment or a commission, but it is one of the line items people circle on a closing statement and ask about, so here is what it is and how the split works.
What the Escrow Fee Pays For
The title company is the neutral party in a Texas closing. It holds the earnest money, collects the loan funds, pays off the seller’s mortgage, pays the agents and the taxes, records the deed and cuts every check. The escrow fee, sometimes shown as a settlement or closing fee, is what it charges for running that process.
It is not the same as the title insurance premium. In Texas, title insurance rates are set by the Texas Department of Insurance, so the premium for the same coverage is the same from one title company to the next. The escrow fee is the title company’s own charge, so it can differ between companies and often runs a little higher on a larger or more complicated closing. If you want to see how the earnest money side of escrow works from start to finish, our piece on how escrow works in a Texas home purchase covers it.
How the Split Works on a TREC Contract
Most Texas resale homes are sold on TREC’s One to Four Family Residential Contract. Paragraph 12 is the settlement and expenses section, and one Texas title company calls it the most overlooked paragraph in the form. Here is the default:
| Expense | Who pays by default |
|---|---|
| Half of the escrow fee | Seller |
| Half of the escrow fee | Buyer |
| Owner’s title policy | Set in paragraph 6, often the seller in the Houston area |
| Lender’s title policy | Buyer |
| Release of the seller’s existing liens | Seller |
The same paragraph has a blank where the seller can agree to pay a fixed dollar amount of the buyer’s expenses. That is where most negotiated help with closing costs lands, and the buyer’s half of the escrow fee can come out of it. The buyer’s lender has to allow the credit, and any credit the buyer cannot use does not turn into cash.
Builder contracts for new construction are not TREC resale forms. Read the closing cost section of the builder’s own contract, because it may split title and escrow charges differently.
When the Buyer Is Using a VA Loan
VA loans limit which fees a veteran can be charged at closing. A title company’s estimate sheet notes that a veteran paying a 1 percent origination charge may not also pay escrow fees, along with a few other charges. In practice, that means the seller or the lender picks up the veteran’s half of the escrow fee. The TREC contract handles this on purpose: the seller’s help with buyer costs is applied first to anything VA rules bar the buyer from paying.
We wrote more on which fees a veteran cannot be charged on a VA loan, because sellers should know about this before they accept a VA offer, not on closing day.
Where It Shows Up on Your Paperwork
- Buyers with a mortgage: on the Loan Estimate within three business days of applying, and again on the Closing Disclosure at least three business days before closing, usually under title services.
- Sellers: on the title company’s estimated settlement statement, which your agent can request well before closing.
- Cash buyers: on the title company’s settlement statement only, so ask for an estimate early.
Peter spent years in construction and mortgage lending before becoming a real estate agent, and the escrow fee is the line he points to when a buyer compares two Loan Estimates and asks why the totals do not match. Often the lender fees are close and the title and escrow lines are what differ.
For the full list of what each side pays, see our breakdowns of Houston buyer closing costs and what Houston sellers pay at closing. The Move Live Love TX Team™ is a husband-and-wife real estate team serving Houston and the surrounding areas.
Frequently Asked Questions
- Who pays the escrow fee in Texas?
- On the standard TREC resale contract used for most Texas home sales, the buyer and the seller each pay one half of the title company's escrow fee. That split is the default, and the two sides can agree to change it in the contract.
- Is the escrow fee the same as title insurance?
- No. The escrow fee pays the title company for handling the closing and the money. Title insurance is a separate policy, and in Texas its premium rates are set by the Texas Department of Insurance, while the escrow fee is the title company's own charge.
- Can the seller pay the buyer's half of the escrow fee?
- Yes. The TREC contract has a blank where the seller agrees to pay a set dollar amount of the buyer's expenses, and the escrow fee can be part of that, as long as the buyer's lender allows the credit.
- Do veterans pay the escrow fee on a VA loan in Texas?
- Often not. VA rules limit the fees a veteran can be charged, and a title company estimate notes that a veteran paying a 1 percent origination charge may not also pay escrow fees, so the seller or lender usually covers that half.
- Where do I see the escrow fee before closing?
- Buyers with a mortgage see it on the Loan Estimate and again on the Closing Disclosure, usually listed under title services as an escrow or settlement fee. Sellers see it on the title company's estimated settlement statement.
