The marital home can often be a point of contention during divorces. Both spouses may want to stay in the home. They may also disagree about how to divide equity fairly and even when to list the property if they agree that selling is the best option.
Some spouses don’t have major disputes about the home. Perhaps one spouse has a pre-existing attachment to the property, or maybe child custody arrangements make it clear that one spouse should retain the home. The spouse who has agreed to leave the marital home, often in exchange for their fair share of equity, may then worry about protecting themselves during the property settlement process.
Frequently, the spouse retaining the home will ask the other spouse to sign a quitclaim deed or similar deed to remove their name from title records. Do spouses risk their interest in home equity if they sign a deed before receiving payment?
Refinancing is a complicated process
To those unfamiliar with property transfers and the nuances of mortgages, signing a deed to give up an interest in a property before receiving payment for home equity might seem dangerous. After all, signing the deed results in the other party assuming sole ownership of the property in most cases. Without an ownership interest, it may seem impossible to secure payment for equity as outlined in the property division order or agreement.
However, there is a clear record of what has transpired. Provided that there is a court-approved property division decree, the spouse retaining the home has a legal responsibility to fulfill their obligations as outlined in that order. They usually need to refinance and withdraw equity to compensate the spouse who left the home.
Typically, the refinancing process requires a correction of the title records for the property. The mortgage lender requires that the previous owner sign a deed and the county recorder’s office update title records before they move forward with the refinancing process. It is therefore necessary to sign a deed before receiving equity from the spouse staying in the home.
Court records and title history documents from the county recorder’s office can help people protect themselves in scenarios where their spouses do not fulfill their obligations. Most of the time, those who sign deeds receive the equity that they deserve shortly afterward. If they do not, they have options available to hold their spouses accountable for deviating from the court order.
Learning about divorce procedures and property division rules can help people feel more empowered as they separate their lives during divorce. Agreeing to sign a deed before receiving equity does not eliminate the right to receive that equity.
