What does "Equity" represent in real estate?

Equity in real estate refers to the difference between the current market value of a property and the outstanding balance on any mortgages or liens against that property. This concept represents the actual ownership stake that a homeowner has built up in their property. If a property is worth $300,000 and the owner owes $200,000 on their mortgage, the equity in that property would be $100,000.

Understanding equity is crucial for homeowners and buyers alike, as it indicates the portion of the property that the owner truly owns free and clear. This can impact financial decisions, such as refinancing, selling the property, or using the equity as a collateral for loans. Therefore, the correct answer clearly encapsulates this fundamental aspect of real estate ownership.