Real estate equity is the difference between the worth of a property and the amount owed on it. The value of a piece of real estate can vary significantly depending on the market. The essence of worth, particularly in real estate, is what a buyer is willing to pay versus what a seller is willing to accept.
More often than not, buyers may think a property is worth less than the seller’s asking price. Conversely, sellers frequently believe their property holds more value than what any buyer is prepared to pay. This disparity necessitates the intervention of real estate appraisers to bridge the gap and establish a more accurate market value.
An appraisal is pivotal as it stipulates the true market value of a property. The variance between the amount owed on the mortgage and the appraisal value constitutes the equity. Ideally, you would hope that the appraisal confirms the property is worth more than what you owe; however, this isn’t always the case.
Should the appraised value be less than the owed amount, such a property is termed
Related Terms: loan-to-value ratio, home appraisal, property equity, mortgage.