What does the term "encumbrance" mean in real estate?

The term "encumbrance" in real estate refers specifically to any claim, lien, or liability that affects a property's title, making it potentially less valuable or more complicated to transfer. Encumbrances include mortgages, liens for unpaid taxes, easements, and restrictions that might limit how the property can be used. These legal claims can impact an owner's rights and the marketability of the property.

Understanding this definition is important for anyone working in real estate, as encumbrances are critical factors in property transactions. Buyers need to be aware of any encumbrances when purchasing property, as they could impose obligations or restrictions that affect their ownership experience. Additionally, lenders will assess the presence of encumbrances during the loan underwriting process to evaluate the risk associated with securing loans against the property.