What You Need to Know About Encumbrances Before Selling or Buying Real Estate- By: William Greenburg

Description : When making the choice to buy a home, it is of utmost importance to make acceptable everything related to the real estate transaction in question. You definitely don't want to enter into a contract and later find something structurally wrong with the home you just bought. You may not realize it, but the home's title has the potential to adversely affect your home purchase as well.

If you're a home seller, this also concerns you. Since it can set you up for unwanted liability, even if you accidentally forget to disclose something, it's not something you want to do. Taking precautions on this may not be enough, since you'll surely want to avoid bad press with respect to this real estate transaction. Small towns in particular are notorious for spreading news quickly, especially when someone has a negative experience they want others to avoid. If this is the case, you have cause to be concerned about your reputation and future home sales in which you're engaged.

A home's structural defects are more easily spotted and rectified, but encumbrances on a home's title also require careful attention on both a buyer's and seller's part. Anything that relates to your property's title in a negative or limiting way is consequently considered an encumbrance in legal circles. This definition includes virtually anything that makes a title transferable, as well as mortgages, leases, easements, liens or deed restrictions.

The following are some things to take note of about encumbrances. You may not know it's an encumbrance but one of the most common examples of which you're probably already familiar is a lien. Liens can be employed by creditors, and they're just monetary claims filed against a piece of land to ensure a debt or obligation against the property's owner. You might end up dealing with a forced property sale if you've stopped paying lien-holding creditors in order to satisfy their claims against you. Another type of encumbrance is a restriction in a deed, since it limits the property in question. Licenses, in contrast, are not considered encumbrances usually because they can be cancelled and are just a privilege given to the person granted the license. As a feature that remains active and transfers from property own to owner, most people also refer to easements as encumbrances.

As a direct result, it is important to know about and understand encumbrances well. If they become too restrictive in nature, an unmarketable title can result. Depending on whether you're a seller or a buyer, you could forfeit either the sale of your existing home or the purchase of a new home. Both selling and purchasing a home is timely and costly, so it is important to check with your realtor to ensure no insurmountable encumbrances exist on the property in question.

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