It would be worth speaking to CAB or similar organisation for up to date advice, and possibly for negotiating with the DWP.
I worked as a Decision Maker in income related benefits for many years, but didn’t deal with Universal Credit.
I have checked the online legislation today and I think that the property is treated as capital.
Equity is calculated by using your estimate of value, if it seems reasonable, or by using an independent valuer if the value is in doubt, or very close to the capital threshold.
The valuation should take any tenancy into consideration when the assessment is made.
Once the value has been established an allowance of 10% of the value is deducted to allow for selling costs, and then charges secured in the property ( mortgage and any secured loans) are deducted.
For example if the property was valued at £150,000 then £15,000 would be deducted leaving £135,000, and if the mortgage was £100,000, the net value would be £35,000. This would be added to any other capital.
Capital of over £16,000 would mean that there is no entitlement to Universal Credit.
If there is no entitlement to Universal Credit then the whole sum paid to you would be treated as overpaid.
A previous poster has mentioned putting the property on the market, which could mean that the value is disregarded for a period of up to 26 weeks. That disregard starts when action is taken to market the property, so might help you with future payments, but not with the past overpayment.
It is incredibly unlikely that any prosecution will be considered. There is a high standard of proof that the person claiming benefit was aware of the rules and deliberately made a statement which they knew to be incorrect, in order to bring such action.
It seems likely that you will be asked to repay, but if you cannot do so in a lump sum you can normally pay by instalments.