Liens and Encumbrances: What Every Homebuyer Should Know
What people usually do when looking for their next perfect home is consider the outer appearance of the house. And it is not surprising because what you will always see first will be the appearance. It’s a quick way of filtering what you want and don’t want. So, upon seeing the next ideal house and carefully examining the outer appearance of the house through house showings, you then ask about the things usually hidden from the naked eye, and those would be what you can find in home inspections.
But wait, does it end when you are done with the inspection? No, people usually skip this part, but people must always remember if the property has liens and encumbrances. So, the house might look perfect and the home inspection might come out good, but this is another factor you should be careful of.
Key Takeaways
- Liens are claims on a home because the owner owes money.
- Encumbrances are any legal limits or restrictions on the property.
- Both can stop or slow down a home sale if they’re not handled.
- A title search helps you find liens and encumbrances before buying.
- Tools like SignFast help you finish the paperwork once the property is clear.
What Are Liens?
A lien is a legal claim on someone’s property because they owe money. It’s like a big sticky note that says, “This house can’t be sold until the debt is paid.”
Let’s say the owner didn’t pay their taxes, or maybe they borrowed money from a bank to fix the roof but didn’t pay the contractor. That person or company can file a lien to make sure they get paid — either now or when the house is sold.
Here’s a simple way to look at it:
If you still owe money on a house, someone else still has a piece of it.
Until the lien is cleared (paid off), the person who placed the lien has a right to the money from the home — sometimes even the home itself.
Liens stay with the property, not just the owner. So if you buy a house with a lien and don’t know about it, that debt might become your problem.
What Are Encumbrances?
An encumbrance is anything that affects how you can use a property or transfer ownership of it. It doesn’t always mean someone owes money. Sometimes, it just means there are rules or limits attached to the land or home.
You can think of an encumbrance as a "legal roadblock" or restriction. It could make it harder to sell the home, build something new, or even park a car in your driveway — depending on what kind of encumbrance it is.
Not all encumbrances are bad. Some are common and won’t stop you from buying or using the home. But you still need to know about them before signing anything.
Remember:
An encumbrance won’t always cost you money, but it can cost you time, control, or peace of mind.
Common Types of Liens
Liens can show up for many reasons, but they all have one thing in common: someone is owed money, and they want to make sure they get paid before the home is sold.
Here are the most common types of liens you might see on a property:
Mortgage Lien
This is the most common kind. When you get a loan to buy a home, the lender places a lien on the property. If you don’t pay your mortgage, the bank can take the home back.
This kind of lien is normal — it’s part of almost every home loan.
Tax Lien
If the owner doesn’t pay property taxes, the local government can place a tax lien on the home. This lien must be paid before the home can be sold.
Unpaid taxes = red flag.
Mechanic’s Lien
If someone did work on the home — like fixing the roof or remodeling a kitchen — and didn’t get paid, they can file a mechanic’s lien.
Even if the work was done years ago, the lien can still show up.
Judgment Lien
If a person loses a lawsuit and owes money, the court can place a lien on their property. This means the winner of the lawsuit might get paid when the home is sold.
This can come from unpaid credit cards, business disputes, or legal fees.
Common Types of Encumbrances
An encumbrance is anything that limits how you can use a property or makes it harder to sell. Some encumbrances involve money (like liens), but many do not. They’re legal restrictions that “stick” to the home, even if the owner changes.
Here are some common types:
Easement
This encumbrance means someone else has a right to use part of your property. One good example of this would be if a utility company may have permission to run power lines through your yard, or a neighbor may have access to a shared driveway.
You still own the land — but you can’t fully control how it’s used.
Restrictive Covenant
These are rules set by a builder, developer, or homeowners’ association. They can control things like:
- What color you can paint your house
- Whether you can build a fence
- If you can rent out your home
These rules stay with the home, no matter who owns it.
Zoning Restriction
Zoning laws decide how a property can be used — like residential, commercial, or agricultural. If your home is in a residential zone, you can’t legally run a business there without special permission.
Even if you own the land, zoning rules set the limits.
Why They Matter When Buying a Home
Liens and encumbrances will cause real problems if you don’t know about them ahead of time.
Here’s why they matter:
You Could Owe Money
If there’s a lien on the home, it means someone is owed money. And if it’s not cleared before you buy, you might have to pay that debt — even though it wasn’t yours.
You Could Be Blocked from Buying
Some liens and encumbrances can hold up the sale. The deal might be delayed until the issue is fixed, or in some cases, it might fall through completely.
You Might Not Use the Property How You Want
Encumbrances like easements, zoning rules, or restrictions can limit what you can build, where you can park, or even how you live in the home. If you’re planning to renovate or rent it out, these rules could stop you.
You Need to Be Informed
The most important reason? You should know exactly what you’re buying. No one wants surprises after closing—especially legal ones.
How to Check for Liens and Encumbrances
Before you buy a home, you want to make sure there are no hidden problems tied to it. That’s why checking for liens and encumbrances is one of the most important steps.
Here’s how it’s usually done:
Do a Title Search
A title search is when someone looks into the history of the property. They check public records to see if there are any:
- Liens (money owed)
- Easements (shared access)
- Restrictions (rules on how to use the land)
A clean title means there are no legal claims or surprises.
Work with a Title Company
Most buyers use a title company to do this search. These companies are experts in finding and explaining anything that could affect the sale. If they find something, they’ll let you know before you sign anything.
Many title companies also offer title insurance, which protects you if something is missed.
Talk to a Real Estate Attorney (Optional)
In more complex situations — like buying a foreclosure or inherited property — a real estate lawyer can help you review documents and make sure everything is legal and safe.
Can You Buy a House with a Lien on It?
Yes, you can buy a house that has a lien on it — but you need to be very careful.
Here’s how it works:
The Lien Usually Has to Be Paid First
Before the home can officially change owners, the lien usually needs to be paid off. This is often done during closing, using money from the sale.
Example: If the seller owes $5,000 in taxes, that money gets paid out of their sale profits before you get the keys.
If the Lien Isn’t Handled, You Could Inherit the Problem
If a lien is missed or ignored, it doesn’t disappear. It stays with the house, even after you buy it. That means you could be on the hook for someone else’s debt.
Make Sure It’s in Writing
If the seller agrees to pay the lien, that should be in the purchase agreement. Never rely on a verbal promise. Get it in writing and make sure your agent or lawyer checks it.
Using Tools Like SignFast for Secure Paperwork
Once all the legal checks are done — the title is clean, and any liens or encumbrances are handled — it’s time to sign the final paperwork. This is where things can either get slow and messy… or fast and easy.
That’s why many buyers and agents now use e-signature tools like SignFast.
With SignFast, you can:
- Sign documents online — no printing, scanning, or mailing
- Keep everything safe and secure — with tamper-proof records
- Use any device — phone, tablet, or computer
- Save time — finish paperwork quickly, even if you’re not in the same place as your agent
After all the work you put in checking for liens and encumbrances, the last thing you want is to delay closing because of paperwork. SignFast helps you finish the job, fast.
Whether you're buying your first home or your fifth, using tools like SignFast makes the closing process smoother and stress-free.
The Bottom Line
Never stop investigating the property after finding out it is in good structural condition. You should always dig further to see if there are liens and encumbrances. It is not one’s fault when he is looking for the perfect home; no one is restricted in doing so. Having a home must feel like home. Having liens and encumbrances will feel like other people have some sort of authority over the property you bought with hard-earned money.
The good news? These issues don’t have to stop you — as long as you know about them ahead of time.
Here’s what to remember:
- Always get a title search before you buy
- Don’t ignore liens or restrictions — ask questions
Use tools like SignFast to make closing safe and simple once everything is clear
