Arizona Real Estate License Practice Exam 2025 – All-in-One Resource to Pass with Confidence!

The term that best describes the act of pledging property as security for a loan while retaining possession is hypothecation. This term specifically refers to the situation where a borrower pledges an asset, such as real estate, as collateral for a loan but retains ownership and possession of the property during the term of the loan. This allows the borrower to use the property while still having the lender's interest secured against it.

The other options pertain to different concepts in real estate and lending. Defeasance involves the cancellation or nullification of a contractual obligation, often relating to a mortgage. Redemption typically refers to the process by which a borrower can reclaim their property after it has been foreclosed, usually by paying off the debt. Subordination is a legal term often used in the context of liens or mortgages that refers to the priority of claims on the property, rather than the act of pledging property as collateral. Understanding these distinctions is crucial for real estate professionals as they navigate the complexities of property financing and ownership rights.