What type of encumbrance typically reduces the value of real property?

A financial lien is an encumbrance that typically reduces the value of real property because it represents a claim against the property. When a lien is placed on a property, it signifies that the owner owes a debt, and the lienholder has the right to satisfy that debt with the property in question. This obligation can deter potential buyers or investors, as they may see the lien as a risk or burden that they would need to address.

Additionally, the presence of a financial lien can indicate that the property owner is facing financial difficulties, which can create negative perceptions in the market. This can lead to reduced offers or a lower market value, as buyers often discount properties burdened with encumbrances that may complicate ownership or transfer.

In contrast, the other options—service easement, leasehold interest, and right of way—may not inherently reduce property value in the same way. While they can imply certain restrictions or rights associated with the property, they do not necessarily indicate an obligation or debt tied to the property that would turn away potential buyers or diminish its overall market value as a financial lien does.