Where this fits on the exam
| Official syllabus topic | XI.B.1 General Concepts: Equity |
|---|---|
| Official PSI area | Real Estate Calculations |
| Published weight | 7% of the national portion |
| Source edition | PSI Georgia Candidate Information Bulletin dated July 1, 2026 |
The Rule
PSI publishes a weight for the complete official area, not a guaranteed count for this individual calculation. Follow the stated facts, units, time basis, and rounding instruction.
Formula and variables
| Symbol or term | Meaning |
|---|---|
| Current market value | The property's value at the time described in the question |
| Current secured debt | Outstanding balances of all liens the problem directs you to include |
| Equity | The owner's residual value before selling expenses |
Step-by-step method
- Identify the current property value, not automatically the purchase price.
- Add the current outstanding balances of every stated secured lien.
- Subtract total current secured debt from current value.
- If solving backward, add equity and debt to find value or subtract equity from value to find debt.
- Do not subtract anticipated commission or closing costs unless the question asks for net proceeds rather than equity.
Georgia-specific distinction
Worked examples
Example 1: First and second liens
Scenario. A property is worth $465,000. The first-loan balance is $278,000 and a home-equity lien balance is $32,000.
- Total secured debt = $278,000 + $32,000 = $310,000.
- Equity = $465,000 - $310,000 = $155,000.
Answer. The owner has $155,000 equity.
Reasonableness check. Debt plus equity equals the $465,000 current value.
Example 2: Find value from equity
Scenario. An owner has $94,000 equity and a current secured loan balance of $226,000.
- Value = equity + debt.
- $94,000 + $226,000 = $320,000.
Answer. The property's implied current value is $320,000.
Reasonableness check. $320,000 - $226,000 returns the $94,000 equity.
Common exam traps
- Using the original purchase price instead of current value
- Using the original loan amount instead of current balance
- Forgetting a second secured lien
- Subtracting sales costs when the question asks for equity, not seller net
Original practice questions with detailed explanations
These original instructional questions map to the July 1, 2026 PSI outline. They are not copied from PSI or any live examination. Write the setup before opening the explanation.
Question 1An owner bought for $300,000 with a $270,000 loan. The home is now worth $385,000, the first-mortgage balance is $251,000, and a home-equity line has a $22,000 balance. What is current equity?
- A. $30,000
- B. $112,000
- C. $115,000
- D. $134,000
Show answer and explanation →
Answer: B. $112,000
Equity is current value minus all current secured debt: $385,000 - $273,000 = $112,000. $134,000 forgets the home-equity line, which is also secured by the property. $115,000 uses the original loan instead of the current balances.
- A. Incorrect. $30,000 is the original down payment, rather than equity at today's value and debt balances.
- B. Correct. $385,000 current value minus $251,000 first loan and $22,000 home-equity line leaves $112,000.
- C. Incorrect. $115,000 subtracts the original $270,000 loan from current value instead of the current secured balances.
- D. Incorrect. $134,000 subtracts only the first mortgage and omits the secured home-equity line.
Question 2An owner has $140,000 of equity. The first-mortgage balance is $215,000 and a second-mortgage balance is $35,000. What current value is implied?
- A. $110,000
- B. $250,000
- C. $355,000
- D. $390,000
Show answer and explanation →
Answer: D. $390,000
Value = equity + all secured debt = $140,000 + $215,000 + $35,000 = $390,000. $355,000 leaves out the second mortgage. $250,000 is the total debt alone, without the owner's equity.
- A. Incorrect. $110,000 subtracts equity from total debt, while value equals their sum.
- B. Incorrect. $250,000 is total secured debt before adding the owner's $140,000 equity.
- C. Incorrect. $355,000 adds equity and the first loan but omits the second loan.
- D. Correct. $140,000 equity plus $215,000 first loan plus $35,000 second loan equals $390,000.
Question 3A home is worth $420,000 and the loan balance is $260,000. If sold, the seller would pay a 6% commission and $4,000 of other costs. The question asks for current equity. What is it?
- A. $130,800
- B. $134,800
- C. $160,000
- D. $189,200
Show answer and explanation →
Answer: C. $160,000
Equity is value minus secured debt: $420,000 - $260,000 = $160,000. $130,800 subtracts the $29,200 of selling costs, which answers a seller-net question rather than the one asked. Selling costs do not reduce equity until a sale actually happens.
- A. Incorrect. $130,800 subtracts commission and other selling costs, calculating hypothetical seller proceeds instead of current equity.
- B. Incorrect. $134,800 subtracts the commission from equity, although the target is equity before selling costs.
- C. Correct. $420,000 value minus $260,000 secured debt equals $160,000 equity.
- D. Incorrect. $189,200 adds the $29,200 selling costs to equity; they are neither value nor secured debt.
Ready to move on?
You have this calculation down when all of these are true.
- I use current value and current lien balances.
- I include multiple secured debts when stated.
- I can rearrange equity, value, and debt.
- I distinguish equity from down payment and seller net.
- I verify that debt plus equity equals value.
Recommended next lesson
Continue with Sections, Townships, Acres, and Square Miles. The next lesson moves from dollars of ownership to acres of land, reading government-survey fractions down from a 640-acre section.
Return to the complete calculation hub, formula sheet, or mixed math drill.