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The basics of encumbrances in real estate

On Behalf of | Jul 21, 2023 | Real Estate Law |

If you have never bought a home before, you should know the meaning of any terms important to your real estate purchase. For example, you might have learned a house you want to buy has an encumbrance.

Basically, an encumbrance is a limitation on how you can use a property. It could even prevent you from buying a house. A basic understanding of how an encumbrance works may help you make an informed decision about your purchase.

Encumbrances are common

You should not feel alarmed about a home having an encumbrance. The truth is that almost every piece of real estate has a limitation of some kind.

For instance, zoning regulations are an encumbrance because they limit what kind of building you can construct on your property. A mortgage is also an encumbrance. The key question is whether or not the encumbrance will be too burdensome for you or impair your transaction.

Title searches can discover encumbrances

Background research on a home could tell you if there are existing encumbrances on it, such as mechanic’s liens and tax liens. A title search performed by real estate professionals can usually check for liens and other limitations on a property.

Title insurance may clear encumbrances

If you have your heart set on buying a home, taking out title insurance could help you. In the event liens or other financial encumbrances show up during or even after a title search, the title insurance can pay them off on your behalf.

Not all encumbrances should prevent you from buying a home. Getting as much information as possible might capture the full scope of your potential rights over a piece of real estate.