Does the net profit from sale of a home include the original cost?

UPDATED: Oct 1, 2022

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Does the net profit from sale of a home include the original cost?

My divorce decree states that my ex-husband
gets 50 of the net profit when our home sells.
He had signed a quit claim deed at the time of
the divorce. It is 4 years later and I am ready
to sell. I believe that I can deduct the
original cost of the home but I am getting
conflicting information regarding net proceeds
because the mortgage has been paid off. Can you
please clarify the difference between net
profit and net proceeds on the sale of a home?

Asked on March 6, 2019 under Family Law, Washington


SJZ, Member, New York Bar / FreeAdvice Contributing Attorney

Answered 3 years ago | Contributor

Net proceeds is the gross amount you receive less any costs, mortgages, or liens paid.
Net profit is the gain in money or equity, which means the gain above the initial cost (after taking out costs, mortgages, etc.).
Example: you bought a home for $200k. You can sell it for $300k. There is no mortgage, but lets assume that the costs of sale (including the realtor fee, etc.) is 7% of the sale price, or $21k.
The net proceeds is $279k: the $300k less the 7% in costs.
The net profit is $79k: you take the $21k in costs out, then the profit is the gain over the original sale price (so $279k after costs - $200k original price), the same way that if a store buys some goods for $10 and sells them for $22, the profit is $12.

IMPORTANT NOTICE: The Answer(s) provided above are for general information only. The attorney providing the answer was not serving as the attorney for the person submitting the question or in any attorney-client relationship with such person. Laws may vary from state to state, and sometimes change. Tiny variations in the facts, or a fact not set forth in a question, often can change a legal outcome or an attorney's conclusion. Although has verified the attorney was admitted to practice law in at least one jurisdiction, he or she may not be authorized to practice law in the jurisdiction referred to in the question, nor is he or she necessarily experienced in the area of the law involved. Unlike the information in the Answer(s) above, upon which you should NOT rely, for personal advice you can rely upon we suggest you retain an attorney to represent you.

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