What is the definition of "equity" in real estate?

Equity in real estate refers to the market value of a property minus any outstanding mortgage balances or liens against the property. This definition is vital because it represents the actual ownership stake that the homeowner has in the property. For instance, if a property is valued at $300,000 and the homeowner owes $200,000 on their mortgage, the equity would be $100,000.

Understanding equity is crucial for investors and homeowners alike, as it can impact financial decisions, such as refinancing, selling, or leveraging the property for loans.

The other options might relate to finance and investments in some way, but they do not accurately capture the definition of equity. The total amount a buyer has paid on a mortgage does not account for the property’s current market value. Profit from selling a property deals with the proceeds after selling, not ownership. Similarly, net gain from a real estate investment is a broader term that includes all profits, without focusing on the specific value of ownership in the asset itself. Therefore, option B most accurately defines equity in the context of real estate.