An encumbrance is a claim, lien, or restriction on a property by someone other than the owner that makes it harder to use or move the property.
When you're getting ready to buy a home, the word "encumbrance" is going to pop up at some point during the process. It sounds more intimidating than it usually is. According to the Cornell Law Institute, an encumbrance is a claim against property by an entity that is not the owner. That claim takes the form of a lien, an easement, a lease, a mortgage, or a restrictive covenant. The key thing to understand is that the encumbrance sits on the property itself, not on the person who owns it.
So what does that mean for you? When you buy a house, it could mean that you have to deal with someone else's problems. A contractor who did roof work but never got paid can have that debt follow the house. The deed will include a county utility easement across the backyard. This is why your closing team does a title search before you sign the last papers.
Most encumbrances are just part of everyday life. Your loan? That's a technical encumbrance. The zoning rules that stop your neighbor from turning their garage into a gas station? Also, there are encumbrances. But some are worse than others. You need to know about the ones that cost money or stop a sale before you get to the closing table.
In my years working in mortgage operations, I've seen encumbrances slow down closings, lower home values, and even kill deals. I have also seen a lot of home buyers get worried about encumbrances that ended up being nothing. Usually, the only thing that makes the difference between those two outcomes is knowing what you're looking at.
Almost every property in the country has some kind of debt on it, which is what really matters. That's how it is. It's not your job as a buyer to find a property that has no debts. It's to find one where the encumbrances don't stop you from doing what you want to do with the place.
An encumbrance is on the property, not on the person. That difference confuses people all the time. If a previous owner didn't pay their taxes, the government could file a lien. Even if the house is sold, the lien stays on the property. The new owner may have to deal with it if it wasn't fixed at closing.
There are two main types of encumbrances. Liens and mortgages are examples of financial encumbrances that involve money. Restrictions on how you can use the land, like easements and zoning rules, are examples of non-financial encumbrances. Both types are recorded in public records, which is how they show up when you look up a title.
The recording system is what makes everything work. When someone files an encumbrance with the county recorder's office, the property becomes part of the public record. That record will stay with the land through every sale, refinance, and transfer until someone officially removes the encumbrance. If you buy a property with a lien that no one cleared, you now own that problem.
One thing I always tell people is to never skip the title search. It may seem like just another fee on the closing statement, but it's the one thing you can do to avoid getting into a financial mess that has nothing to do with you. This is why AmeriSave includes title services as a standard part of every closing.
Encumbrances come in a lot of different shapes, and each type works differently. Some of them are financial. Some are physical. Some are legal restrictions that have been on the land for decades. Let's walk through the most common ones you'll run into.
A lien is a legal claim against a property that secures payment of a debt. When the debt doesn't get paid, the lienholder can force a sale to collect what they're owed. Liens are the most common financial encumbrances, and there are several kinds you should know about.
Mortgage liens are the most familiar type. When you take out a mortgage, your lender places a lien on your home as collateral. You keep living there and making payments, and the lien stays in place until you pay off the loan or refinance. According to the Consumer Financial Protection Bureau, title service fees cover the cost of searching for these and other claims before closing. It's a standard part of the process.
When people don't pay their property taxes or income taxes on time, they get tax liens. The government can put a lien on the house, and that claim comes before most other debts. Most of the time, you have to pay off a tax lien before you can buy a house. Mechanic's liens are what you get when you don't pay a contractor, builder, or supplier. For example, the previous owner had a new deck built but never paid the contractor. The contractor can put a mechanic's lien on the property. This is one of those problems that buyers don't see coming when the title search doesn't find it.
Court decisions lead to judgment liens. If a property owner loses a lawsuit and has to pay money, the winning party puts a lien on the owner's property. Before the title can be transferred cleanly, judgment liens must be paid off, just like tax liens.
An easement gives someone who isn't the property owner the right to use part of the land for a specific purpose. You won't be able to build a fence across it, and you won't be able to block the person or company that holds the easement from using it. Easements run with the land, which means they survive a sale and bind the new owner.
Utility easements are the most common kind. Your power company, gas company, or water district may have the right to access a strip of your property to maintain their equipment. You might not even notice it in day-to-day life, but it can matter when you want to put an addition or a pool in a spot that overlaps with the easement area.
Access easements give a neighbor the right to cross your property to reach a public road. This happens a lot with landlocked parcels where there's no other way to get in or out. Buy a property with an access easement, and you won't be able to block that path.
A restrictive covenant is an agreement written into a property's deed that limits what you do with the property. These are especially common in neighborhoods with a homeowners association. The HOA may have rules about paint colors, fence heights, lawn maintenance, and what kind of structures you build. Those rules are covenants, and they run with the land.
Covenants also exist outside of HOA neighborhoods. A developer might record covenants that prevent commercial use of residential lots, or a previous owner might have agreed to restrictions as part of a deal with a neighbor. The point is that these restrictions carry forward, and you'll be bound by them even when you had no say in creating them. At AmeriSave, we see these types of restrictions come up regularly in the closing process.
An encroachment happens when a structure or improvement crosses onto someone else's property. A fence that's a few inches over the property line, a tree whose roots spread under a neighbor's foundation, a garage that extends past the legal boundary. These may be intentional or accidental, but either way, they can create a potential problem.
Encroachments usually show up on a property survey. The survey can tell you whether anything on the property is where it shouldn't be. Depending on how serious the encroachment is, it can affect the sale price, delay closing, or create a liability issue down the road.
When you buy a property that has a tenant with an active lease, that lease is an encumbrance. The tenant has a legal right to stay and use the property according to the terms of their agreement, and a change in ownership doesn't cancel it. So when you're buying a rental property or a home with a tenant in place, you need to understand what the lease says before you close.
When you're trying to get a mortgage on a property with unresolved financial encumbrances, your lender is going to have questions. Lenders want clean title. A lien that hasn't been paid off can delay your loan approval, and in some cases, the lender can refuse to fund the loan until the issue gets resolved. AmeriSave's underwriting team reviews title reports as part of the standard loan process and can flag anything that needs attention.
Financial encumbrances also hit your wallet directly. The U.S. Department of the Treasury notes that a title insurance policy protects against loss or damage from defects in the title, including liens and encumbrances that existed before the policy date. Title insurance premiums typically run between 0.5% and 1% of the purchase price. For a $350,000 home, that's somewhere between $1,750 and $3,500, which is a real cost. But without it, you'd have no financial safety net when an old encumbrance came back to bite you.
Let's give this some real numbers. Let's say you're buying a home for $325,000 and the title search finds a mechanic's lien for $12,000. Before the sale can close, that lien needs to be cleared. The seller might agree to pay it out of the money they get from the sale, or you could try to get a lower price to make up for it. In either case, it changes the numbers on your deal.
Non-financial burdens can also affect you, but not in terms of money. Easements will tell you where you can and can't put a shed or a garden. You can't run a business from home if you have restrictive covenants. Encroachments can cause problems with neighbors and even lead to legal trouble. None of these have a dollar amount on the lien, but they do affect your quality of life and how you use the property you're paying a lot of money for.
What do you do if you find out about a lien after you've already bought something? It depends on whether or not you have title insurance. Your insurer can cover the loss if you have owner's title insurance and an encumbrance that was there before your policy. You might be on your own without it.
The single best tool for finding encumbrances is a title search. This is a deep dive into the property's public records, and it happens as a standard part of the closing process. A title company or real estate attorney looks through deeds, court records, tax records, and other filings to build a complete picture of who has claims on the property.
The American Land Title Association sets the standards for land title surveys, which combine a title search with an on-the-ground survey of the property. An ALTA survey maps everything: boundaries, improvements, easements, and encroachments. In commercial deals, this kind of survey is almost always required. For residential transactions, a standard title search and title commitment are usually enough.
The title company found what is written in your title commitment. It lists every exception, which is every recorded encumbrance that the title insurance policy won't cover. Take a close look at that list. It's important to ask questions about liens, easements, or covenants that worry you before you sign.
You also look through public records on your own, in addition to the title search. You can look up deeds, liens, and recorded documents in most county recorder offices' online databases. You can check for open building permits, unpaid taxes, and code violations on the websites of your local government. This won't take the place of a professional title search, but it will help you get started.
When you get a loan from AmeriSave, a title search and title commitment are normal parts of the closing process. Your loan officer will explain what comes up and what it means for your deal. That's part of the process, and it's there to keep you safe.
It's a good idea to ask this question early: have the sellers already done a preliminary title search? Some sellers get their own title report before they put their home on the market so they can fix any problems ahead of time. When they have one, ask for a copy. It can save you weeks of going back and forth later.
Different problems need different answers. Paying off the debt is usually the best way to get rid of financial problems like liens. When the debt is paid off, the lienholder sends a release to the county recorder. This removes the lien from the property's record. These payoffs often happen automatically out of the sale proceeds at closing.
Easements are harder to get rid of because they give someone else ongoing rights. You can try to talk the easement holder into giving up their interest, but they don't have to. If the holder of an easement stops using it for a long time and the property owner takes legal action to end it, the easement may be abandoned.
When enough property owners in the area agree to a change, restrictive covenants can sometimes be changed or taken away. For HOA rules, this usually means going through the official amendment process of the association. If the original parties are no longer around, you may need a court order to enforce older covenants that a developer recorded.
Neighbors often work out encroachments by making boundary agreements or moving the structure that is in the way. If the parties can't agree, the property owner can go to court and file a quiet title action to settle the dispute. A quiet title lawsuit clears up any confusion about who owns what and sets clear boundaries for ownership.
No matter what kind it is, the goal is the same: fix the problem before it becomes yours. When you're buying, make sure that any liens are cleared before you close. Before your loan funds, AmeriSave's closing team will work with the title company to make sure everything is in order.
Not always. Keep in mind that almost every property has some kind of debt. A mortgage is a type of debt. An easement for utilities is an encumbrance. Zoning rules are things that get in the way. You won't be able to find a property that doesn't have any of them.
The question is not whether there are encumbrances. It depends on what you want to do with the property. You want to buy a house in a neighborhood with HOA rules, and you're okay with them? There is no problem with those covenants. Buying land to build a workshop, but there's a restrictive covenant that says you can't build anything else on it? A different story.
The financial problems that could become your responsibility should make you think twice. Tax liens, judgment liens, or mechanic's liens that the seller won't pay off before the sale closes. Those will come with the property, and they could cost you a lot of money. If the seller won't work things out, it might be time to leave.
Before you make that call, talk to your real estate lawyer and your lender. They help you figure out how much it will cost to deal with an encumbrance compared to how much the property is worth and what you want to do with it.
In real estate, encumbrances are just part of the deal. Most homes have them, and most of the time they won't change your life at all. But what about the ones that cost money or stop you from doing what you want with the property? You should catch those early.
Do a title search. Read the commitment to the title. If something doesn't seem right, ask questions. If you see a financial problem, make sure it gets fixed before you close. And if something doesn't feel right, don't be afraid to take your time. AmeriSave helps you get through the closing process and puts you in touch with the right people to fix title problems before they become your problem.
A mortgage lien is one of the most common types of encumbrances. Your lender puts a lien on the property as collateral when you take out a home loan. This means that they can take it back if you don't pay it back. Utility easements that let power or water companies get to parts of your yard and HOA covenants that set rules for the neighborhood are two other common examples. Most people who buy a home have to deal with at least one of these during the closing process. Visit AmeriSave's Resource Center to find out more about how the closing process works.
It depends on what kind it is. A standard utility easement probably won't change the value of your home at all. But a big unpaid tax lien or a serious encroachment dispute could make buyers less willing to pay. Buyers are often scared off by financial problems that make it look like you owe money or are in legal trouble. This can slow down a sale. Getting a title report early lets you deal with any issues that could come up. When you need to pay off a lien before listing, AmeriSave's mortgage tools can help you understand your financing options.
Most of the time, title search fees are included in your closing costs. The CFPB says that the average cost of title and settlement services for home buyers is about $1,900 across the country, but the exact amount depends on the state and the property. Some states set rules about how much title insurance costs, which affects how much you pay. Your Loan Estimate will show you these costs in detail before you close. Your loan officer will tell you what to expect when you work with AmeriSave.
It's possible, but not always easy. You can try to get the easement holder to give up their interest, but they don't have to agree. You might be able to say that an easement has been abandoned if it hasn't been used in a long time. But this usually means going through the courts, and you'll need a lawyer to help you. It's especially hard to get rid of access easements for neighbors who don't have any other way to get to the road. Look at what your title commitment says about the easement to begin.
A lien is one kind of encumbrance. Encumbrance is a broad term that includes all claims and restrictions on a property, such as liens, easements, covenants, and leases. A lien is the part of that group that has to do with money. All liens are encumbrances, but not all encumbrances are liens. A utility easement is an encumbrance but not a lien because it doesn't involve money. For more information on how these terms affect your home purchase, check out AmeriSave's mortgage guides.
Title insurance protects you from some encumbrances that were there before your policy date but weren't found during the title search. The U.S. Department of the Treasury says that a title policy protects you from losing money because of problems with the title, such as liens and encumbrances. But it won't cover everything. Your title commitment does not cover items that are listed as exceptions. That's why it's important to read your commitment carefully. Title services are a normal part of the closing process with AmeriSave.
A quiet title action is a legal action that settles who owns a piece of property and gets rid of any other claims on it. A quiet title suit settles things in court when someone has an old lien, an encroachment, or a disagreement over who owns your land. The court looks at the evidence and makes a decision about who has what rights to the property. These steps take a few months and need the help of a real estate lawyer. If your title search finds a complicated problem, talk to your AmeriSave loan team about how it might change when you can close.
Not at all. A lot of encumbrances are neutral or even helpful. Zoning laws that stop your neighborhood from becoming a business area? Those things keep your home value and quality of life high. Rules from the HOA that say neighbors have to keep their yards neat? Those help keep the community looking and feeling good. Unpaid debts, unresolved disputes, or restrictions that get in the way of how you want to use the property are the types of encumbrances that cause problems. You can start looking for homes and neighborhoods by going to AmeriSave's ComeHome website.
In most cases, you can do this, but the lien needs to be settled before or at closing. Most of the time, the seller uses the money they make from the sale to pay off liens. The settlement agent pays off the debt and files the release. If the lien amount is higher than the seller's equity, that makes things worse, and the sale might not go through until the seller finds another way to pay off the debt. Your team works with AmeriSave to help you understand what needs to happen to clear title before your loan money comes in.
It all depends on what kind of encumbrance it is. If you only need to pay off a lien, you can do it in a few days. It could take a few weeks to fix a mistake in the public records. When an encroachment dispute or a quiet title action goes to court, it can take months or even longer. You have more time to deal with the problem before closing if you find it quickly through a title search. The prequalification tool from AmeriSave helps you start the mortgage process early so you have time to deal with title problems when they come up.
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