Minnesota State Real Estate Practice Test 2026 - Free Real Estate Practice Questions and Study Guide

Equity in real estate refers specifically to the difference between the market value of a property and the amount owed on it, which is reflected in choice B. This concept is fundamental in real estate as it indicates the owner's stake or ownership in the property. When the market value of the property increases and the mortgage or liens decrease—whether through repayment or appreciation—the equity increases as well.

In practical terms, if a property is valued at $300,000 and the owner owes $200,000 on the mortgage, the equity is $100,000. This figure represents the portion of the property that the owner truly owns outright, which can be leveraged for loans, used in selling the property, or as a part of the net worth calculation.

The other options do not accurately define equity. The total lien amount on a property refers to the debts secured against it, not the ownership interest. Taxes paid on a property are related to ownership but don’t define equity. Additionally, the increase in interest rates affects mortgage payments and financing costs but does not pertain to the definition of equity itself.