What is an example of an encumbrance on a property?

An encumbrance on a property refers to any claim, lien, or liability that affects the property's title or restricts its use. A mortgage or lien against a property is a prime example of an encumbrance because it represents a legal claim against the property that the owner must satisfy, usually through repayment of a loan. This claim can affect the owner's ability to sell or transfer the property until the mortgage is paid off or the lien is cleared.

In contrast, a home appraisal and a property inspection report, while important aspects of the real estate process, do not impose any restrictions or claims against the property itself; they merely provide assessments of the property's value and condition, respectively. A real estate listing agreement represents the contractual relationship between a property owner and a real estate agent, but it does not create a lien or claim against the property. Thus, the mortgage or lien stands out as the only option that qualifies as an encumbrance.