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Question: 1 / 400

Which of the following describes a legal document that changes the priority of claims against a property?

A title insurance policy

An appraisal report

A subordination agreement

A subordination agreement is a legal document used to change the priority of claims against a property. In the context of real estate and mortgages, priority refers to the order in which debts are satisfied in the event of liquidation or foreclosure. Typically, the first lien recorded on a property has the highest priority and is paid first. A subordination agreement allows a lender holding a subordinate lien to agree to lower their priority in favor of another lien holder. This is essential when a borrower refinancing their property needs a new loan with a higher priority than an existing second mortgage.

By altering the priority status, this agreement allows borrowers to secure better financing options without the risk of losing their property or facing complications due to existing liens. This mechanism is vital for real estate transactions where different lenders have varying interests and claims on the property.

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A mortgage deed

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