Equity

In depth

Equity is the difference between what a property is worth and what is owed against it. Equity grows through principal paydown, appreciation, and value-add improvements. Misconception: equity is not cash; it must be unlocked through sale, refinance, or HELOC to become liquid. Practically, in seller-financed transactions, the buyer's equity starts with the down payment and grows with each amortizing payment. The seller's remaining equity is reflected in the unpaid balance owed under the note. Equitable title in a contract for deed is not the same as equity; equitable title is an ownership interest, while equity is a financial calculation. Buyers should track equity to plan refinances, and sellers should track it to evaluate forfeiture risk and potential resale value if reclaiming the property.