Divorce - A Quitclaim Deed Does Not Release You From Obligation On The Loan

Real Estate Agent with Keller Williams Realty Louisville East (502) 664-7827

It's a common misconception that if "I give her/him the house" you are done with the responsibility for the loan.

If you are signed on the loan, the lender will hold you responsible for the payments whether you have an ownership interest or not. "Giving the house" is often referred to as a "quitclaim". In a quitclaim deed, you are resigning from ownership of the house, but it doesn't take you off the loan. It is sometimes erroneously called a quickclaim deed.

The lender wants to keep everyone on the hook for the loan payments

The lender got you and your spouse to personally guarantee the payments, and they don't care if you're divorcing. All the future performance on that loan will follow you until that loan is paid off. The house either needs to get sold or the other spouse needs to refinance the loan into his/her name.

Your credit will continue to be impacted if the "in the house spouse" misses payments or if the house goes into foreclosure.

Sever those bonds to the mortgage!

Be extremely cautious of of divorce agreements that leave you on the loan, especially if the payment is realistically too high to handle.

If there is more owed on the house than it's worth, you should consider a short sale. In a short sale, the lender agrees to let the house sell for an amount SHORT of the payoff. In an ideal short sale, the lender forgives the deficiency and you never have to pay it back. It varies from case to case.

Getting rid of marital debt may be more important than keeping the marital home

Please have a frank discussion with your divorce attorney about liquidating the debt on the marital home. Do you really want to be dependent for years on your ex's ability and willingness to pay on the loan?

Please call a Realtor who specializes in short sales. You need a realistic assessment of the value of the house in today's current market. I have seen too many cases where the spouse got stuck with an unsellable house even though it appraised for much higher than what it can actually sell for. After months or years of trying to sell the house for "appraised value" the spouse figured out they're stuck and need a way out to avoid foreclosure.

In the Louisville KY and the surrounding counties, please call Dave Halpern at (502) 664-7827.

Posted by



Dave Halpern, Realtor

The Dave Halpern Real Estate Group

Keller Williams Realty Louisville East

Website David.DavidHalpernRealtor.com

(502) 664-7827



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Comments (7)

Karen Anne Stone
New Home Hunters of Fort Worth and Tarrant County - Fort Worth, TX
Fort Worth Real Estate

Dave, as is so often the case... the person demanding the divorce just wants "out."  So, he "gives" his wife the house.  The only way to remove himself from the loan obligation is by having her, or the "house spouse" qualify for a new mortgage.

And... the usual fact is/was that the home was purchased needing two incomes to qualify... so having one spouse qualify... is pretty much impossible.

May 24, 2011 04:02 PM
Lora "Leah" Stern 914-772-4528
Coldwell Banker, 170 N Main Street, New City NY 10956 - New City, NY
Real Estate Salesperson

Dave, I just recently had this issue with a potential client that wanted to list her home as a short sale.  She was under the mistaken impression that if she got her ex husband off the deed she wouldn't have a problem doing a short sale not taking into account that his name was on the mortgage too. 

May 24, 2011 04:07 PM
Evelyn Kennedy
Alain Pinel Realtors - Alameda, CA
Alameda, Real Estate, Alameda, CA


I recently blogged about escrow hurdles and one of those hurdles relates to your blog.  The wife whose former husband had quit claimed his interest to her in their divorce, thought he was out of the picture.  She proceeded to short sale her house and the week of the closing was informed by the lender that the husband would have to be found to sign off on the Deed of Trust.  It was a mess and delayed the close.

May 24, 2011 05:53 PM
Dave Halpern
Keller Williams Realty Louisville East (502) 664-7827 - Louisville, KY
Louisville Short Sale Expert

Karen Anne - that's why so many divorcees call me to short sale their house to short sale their house a year or two after the divorce.

Lora - I'm not sure how that fact isn't made clear to them by their divorce attorney.

Evelyn - If the husband wanted to he could have refused or could have delayed it much longer, thereby pushing the house to foreclosure. Glad you closed it.

May 24, 2011 06:06 PM
Karen Anne Stone
New Home Hunters of Fort Worth and Tarrant County - Fort Worth, TX
Fort Worth Real Estate

Evelyn in #3, the fact that the husband "quit claimed" his interest in the home to his wife does not clear the title.  He still has an "clouded interest" in it... in the form of it being a cloud on the title... and as far as the states I have worked in... he would have had to sign off in order to close the home.

Usually by that time... just about any good feelings between the two are gone... and getting him to sign off... can be a problem... so I am not surprised.

May 24, 2011 06:26 PM
Brian Madigan
RE/MAX West Realty Inc., Brokerage (Toronto) - Toronto, ON
LL.B., Broker



You raise some good points here. Getting rid of debt is an asset.



May 25, 2011 01:22 AM
Pamela Seley
West Coast Realty Division - Murrieta, CA
Residential Real Estate Agent serving SW RivCo CA

Dave, good point about the quitclaim deed. Many think that absolves them of financial liability. It does NOT.

May 26, 2011 07:06 PM