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Encumbrances: Definition, Types & Importance

Instructor: Shawn Grimsley
It's important to know what encumbrances are on a parcel of real estate before a purchase is concluded. In this lesson, you'll learn what encumbrances are, the different types and how they affect property rights. A short quiz follows.

Encumbrance Defined

Nearly all property in the United States is subject to one or more encumbrances. An encumbrance is a claim or lien on a parcel of real estate that burdens it. Documents evidencing an encumbrance on real estate are filed with the relevant government recording office, such as the recorder's officer, where the property is located.

In fact, purchasers and their lenders will have someone (usually a title company or attorney) search these public records to determine the number and nature of all encumbrances on the property as part of their due diligence before concluding the deal or financing it. Why?

Effect on Real Estate

An encumbrance is a burden on your real estate. It basically gives someone other than you some right over your property. Encumbrances may reduce the market value of the encumbered real estate and restrict how its owner is able to use the property. In some cases, an encumbrance may even make a title unmarketable, meaning that a reasonable purchaser would not be willing to purchase the property so long as it is subject to the encumbrance. Let's look at some examples of encumbrances.

Types

Common real property encumbrances include:

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