California Real Estate Practice Exam

Which of the following defines a blanket encumbrance?

1. A single mortgage that covers multiple properties

2. Separate loans for different properties

3. Short-term construction loans

4. Property taxes and assessments collectively

The correct answer is: A single mortgage that covers multiple properties

A blanket encumbrance specifically refers to a single mortgage that encompasses multiple properties. This type of financing allows a borrower to use various properties as collateral under one loan agreement. It is often used by developers and real estate investors who are acquiring multiple pieces of property or looking to streamline their financing process. The advantage of a blanket encumbrance is that it simplifies the management of multiple loans into one, potentially allowing for easier refinancing or sale of individual properties without needing to pay off multiple separate loans. In contrast, separate loans for different properties would not qualify as a blanket encumbrance since each loan would be a distinct financial obligation tied to only one property. Short-term construction loans are specific to funding building projects and do not serve the same purpose as a blanket encumbrance. Finally, while property taxes and assessments are important considerations for property owners, they represent amounts owed to governmental entities rather than a mortgage or encumbrance on multiple properties.