What does the term “encumbrance” mean?

The term "encumbrance" refers specifically to a claim or liability attached to a property that may affect its value or restrict its use. This could include mortgages, liens, easements, or other similar claims that are legally recognized and impact the property. Encumbrances are significant in real estate transactions because they can affect the buyer’s rights to the property and may need to be settled or addressed prior to a sale.

Understanding encumbrances is crucial for title insurance producers, as they must ensure that potential buyers are aware of any encumbrances that could impact the title to the property. This concept is foundational in the field of real estate, as it affects ownership rights and the overall value of the property.