Security instrument for real estate loans, legally infrequent in California, with two parties creating encumbrance. What is it called?

Deed of Trust is incorrect because it is actually the predominant security instrument in California, not the legally infrequent one. A deed of trust involves three parties: borrower, lender, and trustee, unlike the two-party arrangement mentioned in the question.

Promissory Note is incorrect because it represents the borrower's promise to repay but does not create an encumbrance on the property itself. It's simply the IOU portion of the loan transaction, not the security instrument that places a lien on the property.

Option Agreement is incorrect because it gives the holder the right but not the obligation to purchase property, and is not a security instrument at all. It's a completely different type of contract unrelated to loan financing or creating encumbrances.