What is the legal definition of equity?

UPDATED: Aug 30, 2019

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What is the legal definition of equity?

My marriage settlement agreement states that I
am owed 35 od the equity in the property.
What constitutes equity? Does that include
closing costs, comission, etc accrued by the
other party?

Asked on August 30, 2019 under Real Estate Law, California


SJZ, Member, New York Bar / FreeAdvice Contributing Attorney

Answered 3 years ago | Contributor

Equity is the difference between the market value (e.g. what it is sold for) and the mortgate or other loans or liens on the home. However, when the home is sold, closing costs (including commissions) are taken out of the purchase price first, since they *must* be paid before, calculating equity or distrubing proceeds. So in practice, you have to take out any costs to be paid by the seller in selling; then pay off loans or liens; and the remaining balance, if any is the equity.

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