What type of claim can lessen the value of a property, such as a mortgage or lien?

An encumbrance is a claim or liability attached to a property that can affect its value or the owner's rights to use or transfer that property. This category includes mortgages, liens, easements, and other financial obligations that may restrict the use of the property. For example, a mortgage represents a debt owed on the property, which must be settled upon sale or transfer, effectively lowering the marketability and value of the property during that process.

The significance of identifying an encumbrance lies in its ability to prevent the seamless transfer of ownership and clarify the extent to which the property can be used or developed. By contrast, easements grant certain usage rights but do not typically diminish the overall value of the property unless they heavily restrict usage. A lease denotes a tenant's rights and does not inherently lessen the value of the property itself. Finally, a deficiency refers to a situation where a property sells for less than the amount owed on it, which is a different concept altogether. Understanding encumbrances is critical in title insurance and real estate transactions, as they directly impact property value and ownership rights.