What does "equity" refer to in the context of real estate?

In the context of real estate, "equity" refers to the difference between the market value of a property and the outstanding balance of any mortgages or loans secured against it. This concept is crucial because it represents the owner's financial interest in the property. For instance, if a property is worth $300,000 and the mortgage balance is $200,000, the homeowner's equity in the property would be $100,000.

Equity can increase over time through property appreciation or by paying down the mortgage. Understanding equity is essential for homeowners and investors, as it can influence decisions related to refinancing, home equity lines of credit, or selling the property.

In contrast, the other options do not accurately capture the definition of equity. The total amount of cash available for a property purchase pertains to liquidity rather than ownership stake. The net profit from selling a property is related to gains made after sale costs are deducted, which is a separate financial measure. Lastly, the total assessed value of real property is an estimate of value for taxation purposes and does not necessarily reflect the owner's equity. Therefore, recognizing equity as the difference between market value and mortgage balance is essential for understanding one's investment in real estate.