Divorce Decree vs. Quit Claim Deed

Q: In 1995, the court dissolved our marriage. The dissolution of marriage stated our house would be sold as soon as possible, and both parties would share in cost to sell and profit equally. In October of that year, my ex-husband signed a quit claim deed removing his name from the mortgage to allow me to refinance. No money was exchanged between us.

After 13 years and $69,000 of repairs and improvements I finally sold the house. My ex husband is now laying claim to half of the amount I would now get on the basis of today’s selling price and the amount owed on the mortgage at the time I refinanced 13 years ago.

Here’s what I don’t understand: Does the quit claim deed trump the dissolution decree? If the dissolution is the winner, then, in my mind, the answer would be half of the difference between the value of the house at the time of the quit claim deed less the amount I spent making repairs and improvements to the home.

I have a lawyer and he is stumped and tells me to settle. We went to mediation and tried to resolve it, but my ex-husband wanted too much money. We’re due in court soon. Who is right?

A: I can see why your divorce attorney might be a bit perplexed. In theory, when you refinanced the home, you should have settled up with your ex-husband. That would have been the easy time to do it.

Divorce settlements can be difficult in the best of times, but determining values and apportioning expenses can be a bit more complicated.

Let’s start at the time of the refinancing. If you had settled at that time, your ex-husband would have been entitled to half of the value of the home. Let’s assume the value of your home when you refinanced of about $80,000. But you would have been entitled to deduct from that amount his half of the costs that he would have incurred had you and he sold the home. These expenses would have included real estate broker fees, title company and settlement attorney expenses along with any other costs customary in your area. If you were to determine that the amount you owed him at that time was almost nothing, let’s say, $2,500, you have a starting point.

Today, the property has appreciated in value since the refinance. Assuming it has increased $160,000 since 1995, the total value would be $240,000. But you’ve spent $70,000 in repairs and improvements to the property.

If we assume the value of your home has increased by $160,000 over its value 13 years ago, your ex-husband might feel entitled to the $2,500 plus half of the appreciation equal to $80,000. But that might not be the right way to view things.

Here’s the best case scenario for your husband. If he would have received $2,500 at the time of the refinance 13 years ago, you can add the $80,000 in appreciation, but subtract half of the $70,000 you shelled out to make capital improvements to the home.

The difference between those improvements and the increase in value less any other expenses is the most he should be requesting. At most, his share of the profits should be about $47,500.

But there are so many ways to work the numbers that it is difficult to come up with a formula for each situation. The reason your attorney has recommended to you settle is that the cost of litigating the question may be more than the cost to settle.

The divorce decree is still enforceable. The quit claim deed could or could not be construed as your ex-husband’s decision to transfer not only his ownership interest in the property at that time but to relinquish his claim to proceeds from the sale. That determination would be up to the judge to decide.

If the quit claim deed does not change your obligation to share in the proceeds from the sale, the best way to determine your ex-husband’s share of your home is to take the sale’s price for the home, reduce that amount by all of the costs of the sale, further reduce the amount by all of the capital expenditures made to the home since the time of the quit claim deed and then further reduce that amount by the payoff amount of the loan when you refinanced the property at the time your ex gave you the quit claim deed.

Your ex could be entitled to one half of that number.

Here’s how the numbers work: Assuming the house sells for $240,000, we can assume that the costs of the sale will run about $30,000. The resulting amount is about $210,000. You would deduct from that number the capital expenditures of about $70,000 to repay you what you put into the home plus the original loan amount of about $75,000. That brings the amount of profit to $65,000. And your ex-husband’s share would be about $32,500.

Will your ex-spouse happily settle for $30,000? He might. And, that will save you a lot of expense and heartache.

We’ve made lots of assumptions here and other elements could come into play that will dramatically change the equation. Please tell us know what you decide to do.


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