In real estate, what does the term encumbrance refer to?

The term encumbrance in real estate specifically refers to a claim or liability on a property that may affect its value or use. This can include various types of legal claims against the property, such as liens, easements, or restrictions that limit how the property can be used or sold. For instance, if a property has a mortgage, that mortgage is an encumbrance because it represents a financial claim the lender has on the property until it is fully paid off.

Understanding encumbrances is important for buyers and sellers, as they can impact the marketability and market value of real estate. An encumbrance must be disclosed during a property transaction, as it can affect the buyer's decisions and the property's overall worth. Recognizing what encumbrances exist is crucial for making informed decisions in real estate transactions.