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Unencumbered – Definition

Unencumbered Definition

In the real estate industry, a property or an asset is unencumbered when it is clear of any debt, liens or claims. When a property is unencumbered, it means it is not free of financial liability or debt, that means a creditor’s claims can be made on the property or lien placed on the property. A house that has no legal defect or lien is unencumbered, that means it can be easily sold to a buyer or transferred to another party. A vehicle or car can also be unencumbered if automobile loan obtained to purchase the vehicle has been settled.

A Little More on What is Unencumbered

When an asset or a property is unenbcumberted, it means the owner has full claims on the property without any claim from a creditor on the property. Assets that are used as collateral for loans are not unencumbered. Creditor claims, liens, collateralization, due taxes are terms that are not associated with unencumbered properties.

Before buying a house or real estate property, buyers often check the status of the property, whether it is encumbered or unencumbered. Unencumbered properties are free to be sold and transferred. A title search is an important process in the sale or transfer of property. Outstanding liens, creditor claims, collateralization are detected through title search.

Sale of Assets

Sales of a property or asset is much easier when it is unencumbered. Before signing a sale contract or agreement, it is necessary to check whether there are no creditor claims or liens on the property. It is also important that owners of unencumbered assets approve of the sale before the buyer makes payment for the property. The selling price of unencumbered assets are determined by the seller. After a price has been agreed by the buyer and seller of unencumbered assets.

However, encumbered assets can also be sold, both parties involved in the sale process must reach an agreement. The creditor has claims on the property must give approval before the property is sold.

Assets and Bankruptcy

Encumbrances on asset suggest that there are other parties that have claims on the property. When an asset is encumbered, individuals such as credits or financial institutions that have rights and claims on the property are regarded first as the owner before any consideration is given to the initial owner. Owners of rights and claims on the property are first, the owners of the property because this statute allows them to recover their money when the property is acquired.

References for “Unencumbered

https://www.investopedia.com › Personal Finance › Home Ownership › Mortgage

https://investinganswers.com/dictionary/u/unencumbered

www.businessdictionary.com/definition/unencumbered.html

Academic research for “Unencumbered

The value of recourse and cross-default clauses in commercial mortgage contracting, Childs, P. D., Ott, S. H., & Riddiough, T. J. (1996). The value of recourse and cross-default clauses in commercial mortgage contracting. Journal of Banking & Finance, 20(3), 511-536.

Not in that neighborhood: The effects of population and housing on the distribution of mortgage finance within the Chicago SMSA, Shlay, A. B. (1988). Not in that neighborhood: The effects of population and housing on the distribution of mortgage finance within the Chicago SMSA. Social Science Research, 17(2), 137-163.

Covered Bonds: A New Source of US Mortgage Loan Funding?, Lucas, D. J., Fabozzi, F. J., Goodman, L. S., Montanari, A., & Peter, A. (2008). Covered Bonds: A New Source of US Mortgage Loan Funding?. Journal of Structured Finance, 14(3), 44.

Mortgage options for retirees, Storms, P. (2001). Mortgage options for retirees. Journal of Financial Planning, 14(11), 42.

Free and clear: national origins and progress toward unencumbered homeownership among post-civil rights era immigrants in the US, Emeka, A. (2019). Free and clear: national origins and progress toward unencumbered homeownership among post-civil rights era immigrants in the US. Journal of Ethnic and Migration Studies, 1-21.

Enhancing poor and middle class earning capacity with stock acquisition mortgage loans, Ashford, R., & Kantarelis, D. (2016). Enhancing poor and middle class earning capacity with stock acquisition mortgage loans. Economics, Management and Financial Markets, 11(2), 11.

Borrower Suitability Standards for Residential Mortgage Loans, Yen, E. C. (2010). Borrower Suitability Standards for Residential Mortgage Loans. Banking LJ, 127, 138.

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