Illinois Real Estate Practice Exam

A subordination agreement is a legal document created between lien holders to establish the priority of their respective liens or claims against a property. The primary purpose of this agreement is to allow one lien holder to subordinate their interest to that of another lien holder. This means that the lien holder who agrees to subordinate their lien will receive payment after the primary lien holder in the event of a foreclosure or sale of the property.

This arrangement is essential in real estate transactions where multiple liens exist, as it clarifies the hierarchy of claims against the property. The party that holds the primary lien will be in a more favorable position, and the subordinating lien holder acknowledges that their interest in the property is less secure. Such agreements can be crucial for securing financing or negotiating terms, as they can affect the ability of a property owner to refinance or sell their property.

In contrast, the other options mentioned encompass different concepts that do not relate directly to the specific function of subordination agreements. Assessment refers to the process of determining the value of a property for taxation purposes. Forfeiture sale is a procedure through which property is sold to satisfy a debt, often linked to tax issues rather than the formal hierarchy of liens. Priority of liens, while closely related to the concepts involved in sub