Exploring Equity Changes in Balance Sheets

What was the total amount of the loan taken from the bank to purchase the house?

• $750,000

• $1,000,000

• $250,000

• $500,000

What does equity represent in a real estate transaction?

• The total value of the house

• The amount owed to the bank

• The value left after settling liabilities

• The initial loan amount

What happens to the owner's equity if the market value of the house decreases?

• It increases

• It remains the same

• It decreases

• It doubles

What is the term used when the bank takes back the house due to non-payment?

• Foreclosure

• Investment

• Appreciation

• Collateral

What is the purpose of a down payment in a mortgage?

• To increase the bank's profit

• To cover administrative fees

• To secure lower interest rates

• To protect the bank from losses in case of default

What does 'marking to market' mean in the context of real estate?

• Increasing the property's value

• Selling the property

• Assessing the property's current market value

• Renovating the property

If a house's market value drops, what is directly affected on the owner's balance sheet?

• Loan amount

• Bank's equity

• Assets

• Liabilities

What happens to the owner's equity if the house's market value increases?

• It triples

• It decreases

• It increases

• It remains unchanged

What is the financial benefit of leverage when the property value increases?

• Decreased liabilities

• Multiplied equity growth

• Fixed loan repayment

• Increased assets

What was the hypothetical new value of the house in the positive market scenario?

• $1 million

• $1.5 million

• $1.2 million

• $800,000