By Allison R. Seiler and Peyton Luedders
Buying residential property can be both a scary and exciting experience. The process of buying a house involves a lot of complex legal and financial steps, so it is important to understand the process and potential pitfalls to ensure a smooth process.
The following are some of the most important things to keep in mind when buying a house:
- Purchase Agreement
This is often the first step of the real estate transaction process. This contract will detail the terms and conditions of the transaction that are agreed upon by the parties. This will include things such as the purchase price, date of closing, and any contingencies. Contingencies are conditions that must be satisfied in order for the sale to go forward. This can include things such as financing and inspections. It is important to review all of the terms of the purchase agreement and have an attorney look over it.
- Title Search and Title Insurance
Before closing, it is important to do a title search and obtain title insurance. A title search will show any potential encumbrances that the seller’s property is subject to. It also helps ensure that the seller has the legal ability to transfer full title. Things to look for include mortgages, liens, easements, and the property interest that was actually conveyed to the seller in the previous deed. It is important to have an attorney or title insurance company to go through the chain of title closely to ensure there are no defects.
If a title search reveals that the seller’s title is subject to a mortgage or lien, the purchase agreement should include language requiring the seller to pay off those encumbrances with the proceeds from the sale after closing. This ensures that the title is not subject to encumbrances after closing.
Acquiring title insurance is a good way to avoid potential title issues. The title insurance company will do a title search prior to closing to determine whether there are any title issues to resolve before closing.[1] Title insurance is typically a one-time fee of around 0.43% of the purchase price of the property.[2]
- Property Disclosures
The seller is required to provide the buyer with a disclosure statement prior to closing. This disclosure statement must disclose any defects in the property and any improvements on the real property.[3] Additionally, the seller must disclose the presence or potential presence of any lead-based paint in the property.[4] The buyer may have a cause of action if the seller does not comply with these rules. Even though the seller is required to make these disclosures, it is important that the buyer does their own inspection to ensure the property is in the condition that the seller says it is in.
- Financing
Most buyers will need to obtain financing to purchase the house. The most common type of financing for real estate transactions is a mortgage. This process generally starts with the buyer submitting an application to the lender. The lender will check the buyer’s background to ensure the buyer is a low-risk borrower. The lender will also appraise the property to ensure it is worth what the buyer is trying to borrow for it. If the lender and buyer agree on the terms of the mortgage, the lender will fund the purchase of the property and will hold a security interest in it.[5] If the buyer does not make the required loan payments, the lender may foreclose on the property. It is important for the buyer to closely review the loan documents and make sure to stay in compliance with their terms.
- Closing and the Deed
Once all of the above steps are completed, closing can happen. Closing is where the seller provides the buyer with a deed to the property and the buyer provides the seller with the money. After closing, the buyer officially owns the property. At this time, the purchase agreement merges with the deed. This means that the buyer can no longer maintain a cause of action for breach of the purchase agreement unless fraud or mistake exists. However, the buyer may maintain a cause of action for breach of the deed covenants. These covenants should be reviewed closely before closing.
There are three types of deeds that a seller may provide: general warranty deed, special warranty deed, and quitclaim deed. The type of deed to be conveyed at closing will typically be stated in the purchase agreement. With a general warranty deed, the seller covenants to protect against any title issues that occurred during or prior to the seller owning the property. With a special warranty deed, the seller only covenants to protect against any title issues that occurred while the seller owned the property. With a quitclaim deed, the seller makes no covenants.
- Post-Closing Issues
After closing, there are still potential legal issues that can arise. One of these being title issues. If the buyer has title insurance, it is likely that the title company will deal with it. The seller may also be responsible for resolving such title issues depending on the language in the deed. Further, previous sellers may also potentially be responsible. Acquiring title insurance prior to closing is the best way to deal with these potential issues.
Another issue that can arise is undisclosed property defects. If a seller fails to disclose a material defect to a buyer, the buyer can sue the seller upon discovery of that defect. However, the buyer will likely not have a cause of action if the seller actually had no idea about the material defect. It is important to contact an attorney if one of these post-closing issues arise.
Conclusion
There are a lot of things that can happen when purchasing real estate. It is important to have an attorney help throughout the process to mitigate risks. Understanding the overall process and what to look for will help ensure that the process goes smoothly. If you have any questions regarding your own residential real estate transaction, please contact our office to speak with one of our real estate attorneys.
[1] What is Title Insurance and why do I Need it?, First American, https://www.firstam.com/home-buying-guide/what-is-title-insurance-and-why-do-i-need-it/
[2] Nebraska Closing Costs, Consumer Affairs, https://www.consumeraffairs.com/finance/nebraska-closing-costs.html (last visited on August 4, 2025).
[3] Neb. Rev. Stat. § 76-2,120
[4] Lead Rules and Regulations, Nebraska Department of Health and Human Services, https://dhhs.ne.gov/Pages/Lead-Rules-and-Regulations.aspx (last visited on August 4, 2025).
[5] Real Estate Financing (LJP) § 2.02
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