Escrow & Title
In Maine, a 'subordination agreement' in a real estate transaction allows:
AThe buyer to postpone the closing date
BA senior lienholder to agree to accept a lower priority position so a new lien can take priority✓ Correct
CThe seller to retain a portion of the proceeds
DThe municipality to place a lien ahead of the mortgage
Explanation
A subordination agreement allows a lienholder to voluntarily agree to have their lien placed in a lower priority position, typically to allow a new, superior lien (like a refinance or construction loan) to take priority.
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Key Terms to Know
Lien
A financial claim against a property that serves as security for a debt or obligation, giving the creditor the right to foreclose if unpaid.
ProrationThe division of ongoing property expenses (taxes, HOA dues, rents) between buyer and seller at closing based on their respective days of ownership.
Short SaleA sale of real property where the sale proceeds are less than the outstanding mortgage balance, requiring lender approval.
Loan-to-Value Ratio (LTV)The ratio of a mortgage loan amount to the appraised value or purchase price of a property, expressed as a percentage.
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