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Complete glossary lessonNational exam concept

Equity

Equity is the owner's financial interest in property, calculated in a basic exam problem as current property value minus debts and liens against it.

Official area

Real Estate Calculations

Knowledge cluster

Mortgage and ownership calculations

Learning sequence

Define, distinguish, apply, retrieve

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Exam purpose

Recognize the rule, then reject the nearest look-alike.

Georgia lens

Apply the state distinction only when the facts call for it.

Connected terms

Connected to 4 terms and one official content area.

What does Equity mean in real estate?

Equity is the owner's financial interest in property, calculated in a basic exam problem as current property value minus debts and liens against it.

How is Equity different from the closest exam answer?

Equity is not cash in hand and is not always the same as seller net proceeds, which also subtract transaction costs and uses the actual sale figures.

What is the Georgia-specific rule?

Georgia's security-deed title theory does not eliminate the borrower's equitable ownership. Loan paydown and value appreciation can increase equity, while new liens or falling value can reduce it.

Worked exam example

Scenario

A home worth $420,000 has a $265,000 loan balance and a $15,000 lien. Equity is $140,000.

Decision rule

Equity is not cash in hand and is not always the same as seller net proceeds, which also subtract transaction costs and uses the actual sale figures.

What is the most common exam trap?

Trap correction

Use current loan balances, not original loan amounts, and include all liens stated in the problem.

Memory cue: Use current loan balances, not original loan amounts, and include all liens stated in the problem.

Original exam check

Apply the definition

Which statement correctly explains Equity?

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Related terms to learn next

Loan-to-value ratio

Loan-to-value ratio, or LTV, expresses the loan amount as a percentage of the lender's value base.

Seller net proceeds

Seller net proceeds are the amount a seller receives after subtracting payoff amounts, brokerage compensation, taxes, closing costs, debits, and other seller obligations from the gross sale proceeds, then adding any seller credits.

Security deed

A security deed, also called a deed to secure debt, is Georgia's customary instrument for securing a real estate loan.

Lien

A lien is a nonpossessory legal claim or charge against property that secures payment of a debt or performance of an obligation.

Recommended next complete lesson

Continue with Real Estate Calculations complete lesson. It places this term inside the full rule, worked examples, exam traps, and mixed practice required for mastery.
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Equity quick answers

Facts checked against the current PSI Candidate Information Bulletin and GREC sources. Editorial standards.

What is Equity?

Equity is the owner's financial interest in property, calculated in a basic exam problem as current property value minus debts and liens against it.

What is Equity commonly confused with?

Equity is not cash in hand and is not always the same as seller net proceeds, which also subtract transaction costs and uses the actual sale figures.

How does Georgia treat Equity?

Georgia's security-deed title theory does not eliminate the borrower's equitable ownership. Loan paydown and value appreciation can increase equity, while new liens or falling value can reduce it.