Buying or Selling Real Estate in California? What Happens When There Is an Encumbrance on the Property?

When you finally find the California property of your dreams you will discover that there are one or more encumbrances on it. What is an encumbrance and how does this impact you and your purchase or sale of real estate? Accepting, removing or otherwise resolving the encumbrance issue depends upon the nature of the encumbrance.

What Is an Encumbrance?

An encumbrance is a claim made against a property by someone other than the property holder.

This claim, or liability, impacts the title of the property. Because of this, the transfer of the title of the property or permission for property usage is not as simple and straightforward as it would be without an encumbrance.

For example, let’s say you owe a debt to Bob and don’t have sufficient cash to pay him, but you do have real estate. The value of your real estate exceeds the amount you owe Bob, so you offer to grant Bob a lien, an “encumbrance”, on your real estate. Bob, through this lien, becomes a shareholder of sorts in the property or properties encumbered. This is called a property lien.

When you decide to sell this piece of property, you and Bob will both receive payments. Therefore, when you negotiate this sale, you will do so with the goal of receiving enough money from the sale to pay your debt to Bob and take care of your other financial needs.

Common Encumbrances

Some common real estate encumbrances are:

  • property liens
  • deed restrictions
  • easements
  • Profits (for example, mining or logging rights)
  • encroachments

Any money you borrowed to purchase your home or other real estate, secured by a  mortgage or trust deed, is a typical encumbrance.

What If You’re Buying or Selling a Home with an Encumbrance?

Whether you are buying or selling, the steps you will take are the same. First, figure out what types of encumbrances you are dealing with. This task requires careful attention to detail by you, by Bob in the above example, and by any other encumbrance holders involved in your transaction.

Second, decide whether encumbrances will be accepted, rejected, or otherwise resolved. Typically, known financial liens are repaid and removed from the property or replaced by new financial liens. For unexpected financial liens or other encumbrances that aren’t so straightforward, contact an experienced lawyer like Kevin Forrester.

Now is the time to seek help from professionals. Kevin Forrester is a California real estate law attorney who can help you resolve your property encumbrance issues and proceed with your property transfer. Call him today at 760-932-0999.

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