Buying a House in Nebraska

Buying a house is one of the most important legal transactions you'll ever undertake. It's important to know your legal rights and understand the process.

Working With a Real Estate Agent

In Nebraska, real estate agents may act as a buyer's agent, a seller's agent or a dual agent which means that the agent represents both parties to a sales transaction. State law requires real estate agents to disclose agency relationships to the parties to a sales transaction. Real estate agents have what's called a "fiduciary duty" to the party who they are legally representing, in this case, the buyer. This means that they are held by law to owe specific duties to the buyer. In addition to duties or obligations that are stated in an agency agreement or other written contract, a fiduciary owes the buyer the following duties:

• Loyalty
• Obedience
• Disclosure
• Confidentiality
• Reasonable care
• Diligence
• Accounting

You may want to hire a buyer's agent, which is someone that will act on your behalf. The sales commission is then split between the seller's and buyer's agent.

When selling a house, disclosure of all important facts actually known to the seller is critical, even though it may impact on the ability to complete the sales transaction or on the ultimate sales price of the house. Nebraska law requires sellers to disclose defects to the buyer.

A seller should disclose the following potential house defects:

• Plumbing and sewage problems
• Water leakage of any type, including in basements
• Termites or other infestations
• Roof defects
• Heating or air conditioning system or electrical system problems
• Property drainage problems
• Foundation instabilities or cracks or structural problems
• Problems with title to the property
• Hazardous materials
• Substantial additions or alterations made without a building permit
• Any other problems

Purchase Agreements

When you find a house you'd like to buy, you'll put together and sign a purchase and sale agreement, which contains all of the terms of the sale, including the following:

• The names and addresses of the sellers and purchasers
• The purchase price and how it is to be paid, including any down payment or earnest money deposit
• Arrangements for financing
• The legal description of the property
• A provision that title to the property shall be good and marketable of record, subject to reasonable easements
• The condition of the property at the time of closing
• Whether a survey and appraisal are to be made and, if so, at whose expense
• All expenses to be divided between the seller and purchaser
• The method of handling any escrow account containing reserves for payment of taxes and insurance held by the seller's mortgage company
• Seller's statement of the condition of the property
• Closing date and possession
• Statement of the closing costs
• That all closing documents must be acceptable to purchaser's attorney
• Provision as to who bears the risk of loss if the property should be damaged prior to the closing date
• Name of sales agent and any commission due
• Signatures of parties

An important thing to remember is that you should consult your Nebraska real estate attorney before you sign the contract. The real estate transactions involved in purchasing a home give rise to a number of legal questions that a lawyer with a real estate background and experience is best equipped to answer.

Inspection

It's always a good idea to hire an independent professional home inspection service before you buy a house. A home inspection is a visual examination of some combination of the structural, mechanical, electrical and plumbing systems that is designed to identify material defects in those systems and components. You can make your offer contingent on inspection.

Every inspection should include an evaluation of at least the following:

• Foundation
• Plumbing and electrical systems
• Doors
• Ceilings, walls and floors
• Roof
• Hazardous materials concerns
• Heating and air conditioning systems
• Common areas (in condominiums)
• Insulation
• Ventilation

Most inspectors will charge extra for services such as radon testing, termite inspections and well or septic inspections.

Legal Title Issues

When a home is purchased, title insurance is also purchased. Based upon a search of public records, a title search brings attention to any known property title problems before the closing takes place. It also insures against loss due to certain title defects that didn't turn up during the title search. Your real estate lawyer or title company will investigate the legal title of the property you want to buy, and may find issues you'll need to understand.

In Nebraska, for example, an implied easement exists where a person grants lands to which there is no accessible right-of-way except over her or his land or retains land that is inaccessible except over the land which the person conveys. In such instances a right-of-way is presumed to have been granted or reserved. Such an implied grant or easement in lands or estates exists where there is no other reasonable and practicable way of accessing the property, and it is reasonably necessary for the beneficial use or enjoyment of the part granted or reserved.

The property you're interested in may also be subject to a "lien," which is a charge on the property to satisfy a debt or other obligation owed by the current owner of the property. A lien encumbers property for as long as it exists and has been recorded in the public records.

In Nebraska, liens on a piece of property may include:

• Mortgages
• Deeds of trust
• Land sale contracts
• Involuntary liens (includes workmen's liens, liens for unpaid taxes and liens filed by creditors holding judgments against the owner)

Closing Costs

"Closing costs" are expenses incurred by buyers and sellers in transferring ownership of property. In Nebraska, you can expect to pay for the following closing costs at the time you purchase your home:

• Loan origination fee
• Attorney's fee
• Taxes
• An amount placed in escrow
• Charges for obtaining title insurance
• Charges for obtaining a survey

Many times buyers and sellers may negotiate who pays which costs as part of the final terms of the purchase agreement.

RESPA

The US Department of Housing and Urban Development's (HUD) Federal Housing Administration (FHA) administers several regulatory programs to ensure equity and efficiency in the sale of housing. One of these programs, under the Real Estate Settlement Procedures Act (RESPA), applies to almost all mortgage loans and mortgage companies, not just FHA-insured mortgages.

RESPA protects consumers by requiring a series of disclosures that prevent unethical practices by mortgage companies and that provide consumers with the information to choose the real estate settlement services most suited to their needs. RESPA helps consumers avoid surprises, like when an unexpected fee appears in your closing documents. The disclosures take place at various times throughout the settlement process. Certain disclosures are required at the time of loan application, before closing occurs, at closing, and after closing. To learn more about RESPA visit the Real Estate Settlement Procedures Act Web site.

Mortgages and Deeds of Trust

At the time of purchase, you'll sign a promissory note that legally obligates you to pay back the money you borrowed to buy your house. A promissory note is, in effect, an "IOU." You promise to pay your lender the full amount, payable in equal monthly installments, at the interest rate previously agreed upon. Your lender will keep the original until you completely pay off the loan.

In Nebraska, the document you sign as a security interest in your house is called either a mortgage or deed of trust. Both deeds of trust with a private power of sale and mortgages are used as security instruments, and under both documents, your house is named as the collateral for the loan. Mortgages generally require judicial foreclosure while deeds of trust do not. Under the terms of a mortgage, the lender will have to go to court and get a foreclosure judgement before your house can be sold to pay off your loan if you default, or fail to make your loan payments.

Under a deed of trust, the title to your property is placed in the name of the third party, called a trustee. If you default on the loan, the lender can have the trustee exercise his private power of sale, which is a term in the deed of trust, and the trustee can sell your house without first going to court. Lenders often prefer deeds of trust over mortgages because if you default, the trustee's sale of your house is faster and less expensive than a foreclosure action under a mortgage. Because mortgage terms and rates may vary, it's a good idea to shop around and get the best possible deal on your loan.