{"id":873,"count":4,"description":"\r\n\r\nJump to: \r\nWhat is equity?<\/a>\r\nWhat is equity?<\/a>\r\nHow to reduce equity?<\/a>\r\n\r\nWhat is equity?\r\n\r\nIn real estate, equity is the percentage of a property that a person or entity owns free and clear. Without equity, a property cannot easily be sold or borrowed against, because more is owed on the property than is owned of it.\r\nGenerally defined as the difference between the market value of a property and the amount that is owed on that property (for example to a lender on a mortgage).\r\n\r\nVery simply put, if the market value of a building in $300,000 and the owner still owes $110,000 on the mortgage, the owner\u2019s equity is the difference of $190,000. When equity is 100%, it means the property is paid off and fully belongs to the owner.\r\n\r\nA company\u2019s equity on the balance sheet is the difference between the company\u2019s total liabilities and the company\u2019s total assets.\r\n\r\n\r\n\r\n\r\n\r\nHow to increase\/build equity?\r\n\r\n\r\nThere are several factors that can increase the owner\u2019s equity:\r\n- The bigger the mortgage down payment, the bigger the starting equity is, when purchasing a property.\r\n- With each mortgage payment made, equity increases. Extra payments made to apply to the mortgage principal increase equity further.\r\n- Improvements contribute to increasing a property\u2019s market value. This, in turn, increases the owner\u2019s equity, provided the improvements are not financed through a loan. The amount of improvement equity is only truly determined at the time of sale of the property.\r\n- Market value appreciation is beneficial, as well \u2013 if similar properties in the area are selling for higher prices, this positively affects the market value of all properties in the area and this reflects on owner equity.\r\n\r\n\r\n\r\n\r\n\r\n\r\n\r\nHow to reduce equity?\r\n\r\nAll the positive equity factors listed above can also work in reverse:\r\n- By refinancing a loan\/taking out a second mortgage, the principal of the loans taken out against the property increase, therefore equity falls.\r\n- If there is extensive damage to the property and the loss cannot be covered by the owner\u2019s insurance, equity falls. Similarly, deferred maintenance decreases equity: if the property is not kept from deteriorating over time, costs to make major repairs end up chipping away at equity.\r\n- A decrease in market value automatically decreases equity.\r\n\r\n\r\n\r\n\r\n\r\nYou might also be interested in:\r\n\r\n How to reduce equity?<\/a>\r\nIs a notary public the same as a lawyer?<\/a>\r\nIs it better to have a high or a low cap rate?<\/a>\r\n\r\n\r\n\r\n\r\n\r\n\r\nSearch other terms\r\n\r\n\r\nA<\/a>\r\nB<\/a>\r\nC<\/a>\r\nD<\/a>\r\n\r\n\r\nE<\/a>\r\nF<\/a>\r\nG<\/a>\r\nH<\/a>\r\n\r\n\r\nI<\/a>\r\nJ<\/a>\r\nK<\/a>\r\nL<\/a>\r\n\r\n\r\nM<\/a>\r\nN<\/a>\r\nO<\/a>\r\nP<\/a>\r\n\r\n\r\nQ<\/a>\r\nR<\/a>\r\nS<\/a>\r\nT<\/a>\r\n\r\n\r\nU<\/a>\r\nV<\/a>\r\nW<\/a>\r\nX<\/a>\r\n\r\n\r\nY<\/a>\r\nZ<\/a>\r\n\r\n\r\n\r\n\r\n\r\nPopular terms\r\n\r\n\r\n\r\n\r\nAmortization<\/a>\r\n\r\n\r\nEquity <\/a>\r\n\r\n\r\nNotary Public <\/a>\r\n\r\n\r\nProgression\/Regression<\/a>\r\n\r\n\r\nAcquisition <\/a>\r\n\r\n\r\nAnnuity <\/a>\r\n\r\n\r\nAsset <\/a>\r\n \r\n \r\n Fiduciary <\/a>\r\n\r\n \r\n Inflation <\/a>\r\n\r\n \r\n Contingency <\/a>\r\n\r\n \r\n Escrow<\/a>\r\n\r\n \r\n Power of attorney <\/a>\r\n\r\n \r\n Real Estate Agent <\/a>\r\n\r\n \r\n Eminent Domain <\/a>\r\n\r\n \r\n Liability <\/a>\r\n\r\n \r\n Statute of Limitations<\/a>\r\n\r\n \r\n Valid <\/a>\r\n\r\n \r\n Variance<\/a>\r\n\r\n \r\n Contiguous <\/a>\r\n\r\n \r\n Deficit<\/a>\r\n\r\n\r\n\r\n\r\n","link":"https:\/\/www.commercialcafe.com\/blog\/tag\/cre-term-equity\/","name":"Equity","slug":"cre-term-equity","taxonomy":"post_tag","meta":[],"yoast_head":"\nWhat is Equity? - Commercial Real Estate Dictionary<\/title>\n<meta name=\"description\" content=\"In real estate, equity is the percentage of a property that a person or entity owns free and clear. Without equity, a property cannot easily be sold or borrowed against, because more is owed on the property than is owned of it.\" \/>\n<meta name=\"robots\" content=\"index, follow, max-snippet:-1, max-image-preview:large, max-video-preview:-1\" \/>\n<link rel=\"canonical\" href=\"https:\/\/www.commercialcafe.com\/blog\/tag\/cre-term-equity\/\" \/>\n<meta property=\"og:locale\" content=\"en_US\" \/>\n<meta property=\"og:type\" content=\"article\" \/>\n<meta property=\"og:title\" content=\"Equity Archives\" \/>\n<meta property=\"og:description\" content=\"In real estate, equity is the percentage of a property that a person or entity owns free and clear. 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