In real estate transactions, what does "encumbered" mean?

The term "encumbered" in real estate refers specifically to a property that has a lien or a mortgage against it. When a property is encumbered, it means that there are legal claims or restrictions placed on the property, typically in the form of a financial obligation like a mortgage or a lien for unpaid taxes. This can affect the owner's ability to sell or refinance the property, as the debts associated with the encumbrances must generally be satisfied or disclosed during transactions.

Understanding this concept is crucial for real estate professionals, as it impacts property value, marketability, and the overall financial health of the property. An encumbered property can still be sold, but potential buyers must be aware of any outstanding debts that may need to be addressed.