What does "equity" refer to in real estate?

Equity in real estate specifically refers to the difference between a property's market value and the total amount owed on any outstanding mortgages or liens against that property. This means that if a property is worth $300,000 and the owner owes $200,000 on their mortgage, the equity in that property would be $100,000. This concept is crucial as it represents the owner's financial interest in the property and is a key indicator of wealth accumulation through real estate investment. Understanding equity is fundamental for real estate investors and homeowners, as it affects buying, selling, and refinancing decisions.