What is an encumbrance in real estate?

An encumbrance is any claim, lien, charge, or liability attached to real property that may diminish its value or restrict its use but does not necessarily prevent transfer of title. Encumbrances fall into two categories: financial encumbrances like liens and mortgages that affect the property's monetary value, and non-financial encumbrances like easements, deed restrictions, and encroachments that affect the property's use. A property can have multiple encumbrances simultaneously. Title searches reveal recorded encumbrances so buyers know what limitations exist before purchasing.