Quitclaiming Your House to Your Ex-Spouse Could Tie Up Your Credit for Years

Reblogger Barb Van Stensel
Real Estate Agent

 

Divorce is considered a hardship for a short sale.  It is what the bank considers it "verifiable".  Let's say that you were the non-bread winner on the mortgage (co-borrower), and yet you were awarded the family home.  I trust your divorce attorney got an appraisal on the marital estate to ensure fairness in the final settlement.  Either way, just because the "ex" signs a Quit Claim Deed to the property, it only removes him from the title.  While the "ex" may think he/she can relax, I got news:  It can affect your credit and buying power down the road. 

Dave Halpern, a friend in the mdiwest writes how Quit Claiming the Marital Property to the awarded spouse will still effect you.  You need two things when going through a divorce:  a good attorney that understands negative equity and proper settlement/closure and when it's all done, a good Realtor who understands and can negotiate the short sale process.  Go ahead, read it ... it won't hurt and maybe it just might help you down the road or right now!

 

Original content by Dave Halpern

Your credit could be tied up for years if you quitclaim your ownership interest of the house to your spouse or ex-spouse. This could hurt you even if you maintain excellent credit. This future impact may be overlooked in a divorce agreement.

Credit Score and Deby Ratios are Two Separate Issues

There are two separate issues at play here;

  1. The impact of your mortgage payments on your credit
  2. The debt load a future lender considers safe you as a new borrower

The Impact of Your Mortgage Payments on Your Credit

Even if your ex-spouse makes perfect payments on the mortgage, the debt will still show up on your credit report. The ex’s perfect payments will actually strengthen your credit without you having to pay a dime. If the ex doesn’t pay on time, it will hurt your credit score. Your lender doesn’t care about who bears the responsibility in the divorce agreement.

The Debt Load a Future Lender Considers Safe for You as a New Borrower

The mortgage balance will continue to show up on your credit report, which will hurt what is called your “debt ratios”. This may mean you have too much debt to be qualified for your next mortgage when you want to buy a new home.

This could tie up your credit for years. Even if you have excellent credit, and even if your ex made perfect payments, your ability to borrow may be tied up in a knot. Please consult with a mortgage professional before quitclaiming a deed to your ex-spouse. If you owe more on the house than it is worth, please consult with a short sale Realtor.

What is a Quitclaim? Aren’t I Getting Rid of the House?

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.

Sever those bonds to the mortgage!

Be extremely cautious 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. 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 needed a way out to avoid foreclosure.

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

 

 

Dave Halpern

Real Estate Broker, Louisville Short Sale Expert Realtors

(502) 664-7827

************************************************************************************

Sellers looking for foreclosure help in Louisville, KY should call Dave Halpern, Realtor, Louisville Short Sale Expert Realtors, (502) 664-7827. I will dedicate to you all the time you need for a full explanation of the process. We are compassionate, caring and patient. I will listen to your needs and wishes and customize a strategy to meet your circumstances.

I will provide you detailed information about foreclosure options and short sales. We help dozens of sellers avoid foreclosure every single year in Louisville, Jefferson County, Oldham County, Bullitt County, Shelby County, Nelson County and Spencer County.

We can help. You have options. Call even if you think your house isn't sellable. Put an expert real estate agent on your side. Many testimonials available.

Dave also trains other Realtors how to perform successful short sales.

IMPORTANT NOTICE: LouisvilleShortSaleExpert.com is not associated with the government, and our service is not approved by the government or your lender. Even if you accept this offer and use our service, your lender may not agree to change your loan. If you stop paying your mortgage, you could lose your home and damage your credit. We do not provide legal advice, you are encouraged to seek legal counsel. We cannot and will not charge upfront fees.

View Dave Halpern's profile on LinkedIndave_halpern twitterhalperndave_facebookDave Halpern QR CodeLouisville Foreclosure Realtors Dave Halpern

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Rainmaker
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Margo Currie
Exit 1 Stop Realty - Saint Augustine Beach, FL

Thank you for some valuable information.

Jun 10, 2011 02:28 AM #1
Ambassador
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Melissa Zavala
Broadpoint Properties - Escondido, CA
Broker, Escondido Real Estate, San Diego County

Dave always shares great information. Nice post to reblog.

Jun 10, 2011 02:29 AM #2
Rainmaker
1,004,473
Karen Anne Stone
New Home Hunters of Fort Worth and Tarrant County - Fort Worth, TX
Fort Worth Real Estate

There is no connection between an ex-husband quit-claiming his "interest" in the family home to his wife, and relieving himself of the obligation of the mortgage loan.  No lender in the world is going to take him off the loan.

The only way that would ever happen is if the now-single "ex" refinances the existing loan, which will probably be impossible due to being upside down, or due to trying to qualify with one income now... when it was originally purchases with two incomes.

Quit-claiming is NOT a conveyance.  It is simply an abandonment of one's interest in the property.  And with that abandonment of interest also comes an abandonment of any control he (or if it's an ex-wife doing it... she) has over what is done with the home. 

The quit-claiming ex will continue to be responsible for the debt, and have it be considered a debt on his credit for future qualifying purposes... unless he (or she) finds a lender crazy enough to over-look it.  I doubt that would ever happen.

I have always known that this was the case... but as several mentioned... many "assume" that it is not.  Quitclaiming an interest, and being relieved from liability on the loan... are not connected.

Jun 10, 2011 06:52 AM #3
Rainmaker
287,577
Barb Van Stensel
Chicago, IL

Totally agree with you Karen.  It is amazing how the divorce system doesn't understand but then again, how many divorces would not be finalized if they waited for the refinance which, proabaly will never take place because of the market today?

Most think that it is.  I don't know why the attorneys are not explaining it unless it would open up another area and they may feel their clients don't have enough money and so, they just let it go?  Every last one of my friends who has gotten a divorce and then reached out to me asking me what they should do because the value isn't there.  No appraisal ordered to determine the value at the time of the divorce for proper, fair and equal settlement.  It is not a conveyance and think some feel that a Quit Claim Deed is like "out of sight, out of mind" ... until the bank comes knocking at their door.  An area that needs attention.

Jun 10, 2011 08:03 AM #4
Rainmaker
525,239
Dave Halpern
Keller Williams Realty Louisville East (502) 664-7827 - Louisville, KY
Louisville Short Sale Expert

Barb, thanks for the reblog! And thanks for elevating me to friend status!

Many divorce decrees have unfulfillable terms, such as refinancing an underwater loan. Like you said in comment #4, we're called in when it's too late.

Jun 10, 2011 03:18 PM #5
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Barb Van Stensel

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