Which term describes the difference between the market value of a property and the amount owed on that property?

The term that describes the difference between the market value of a property and the amount owed on that property is equity. Equity represents the owner's financial interest in the property, calculated by subtracting the total outstanding mortgage and any other liens from the property's current market value. For example, if a property has a market value of $300,000 and the owner owes $200,000 on the mortgage, the equity in the property would be $100,000. This concept is essential in real estate, as it reflects the homeowner's stake in the property and can impact decisions regarding refinancing, selling, or leveraging the property for additional financing.

Understanding equity is crucial for real estate professionals, as it influences property ownership, investment strategies, and overall financial health. While capitalization pertains to figuring out the value based on income generated by the property, appreciation refers to the increase in property value over time. Investment return relates to the overall profit made from an investment, which may involve various factors beyond just market value minus debt. Therefore, equity is the precise term that accurately captures the relationship between market value and obligations against the property.