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Subordination refers to the process where one creditor's claim on a real estate asset is made junior to another's, commonly occurring during debt refinancing. The tutorial explains this concept using a timeline, starting from the acquisition day when senior debt is established on a property. Real estate claims are prioritized chronologically based on their recording. As junior debt is added after the senior debt, it holds a subordinate position. If the senior debt is refinanced and replaced with a new loan, this new loan then becomes the primary claim on the property, affecting the junior debt's position. The explanation highlights the importance of understanding the hierarchy of claims in real estate financing.