Which of the following best describes "encumbrance" in real estate?

The term "encumbrance" in real estate refers to a claim or charge attached to a property that can affect the owner's ability to transfer or sell it. This can include various types of claims such as liens, easements, or restrictions on the use of the property. Encumbrances can impact the property's value and may require resolution before the property can be sold or refinanced. For example, a mortgage is a type of encumbrance that gives the lender a claim on the property until the loan is repaid.

In contrast, legal ownership of the property pertains to the rights and title held by the owner, which does not encompass the broader implications of encumbrances. Financing options relate specifically to how a property is purchased or financed, rather than claims against it. A formal auction process is a method of selling property, not a description of claims or charges related to it. Understanding these distinctions is vital in real estate to clarify how ownership and encumbrances interact.