Assessing Unencumbered Value of a Property, What Does it Mean?

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Assessing Unencumbered Value of a Property, What Does it Mean?

If you are considering buying a home, you’re probably already aware of all the necessary requirements that come with purchasing one. You research the property and get the home inspected, but one important factor many people overlook is the unencumbered value of the property, which can have dramatic effects on you as the new owner. What does unencumbered value mean and what is its impact? Let’s take a look.  

What Does Unencumbered Value Mean? 

“Unencumbered” refers to a property with no encumbrances, including legal claims, liens, mortgages, or any other obligations from creditors that can affect the value of the property and the homeowner’s right to sell. When a property is encumbered, another individual or organization has an underlying claim on it. This encumbrance is attached in the form of liens, legal judgments, or unpaid taxes. In real estate, properties with no encumbrances are easier to transfer to a new owner, which means that the value of the property is higher. To summarize the main differences between unencumbered and encumbered a property: 


  • Has no underlying claims, liens, or judgments on the property 
  • The current owner has full possession of the property 
  • The current owner is free to sell the property to the new owner 


  • There are underlying claims or other obligations on the property 
  • Current owner does not have full control of the property 
  • Current owner must remove encumbrances before selling 

Example of Unencumbered Value 

If you are looking to buy a house, and if there was an undiscovered tax claim on the home, then the home would not be free to purchase until that claim is settled with the local, state, or federal government. If the encumbrances attached to the home go undetected, you as the new owner will become responsible for the claim and now at risk of losing the property. But don’t worry: this is why your mortgage lender will have a title company run a title search on the property to ensure it is unencumbered and free for you to purchase. 

Unencumbered values exist to protect the value of the property, that’s why it’s a good idea to have your mortgage company run a title search to save you from unexpected surprises down the road. If you want to learn more about unencumbered values, contact PCL today, we are a full-service lender with experience in every area of mortgage lending, including refinancing and reverse mortgages.