First of all, it does not matter if she is on the mortgage or deed if the contract gives her right to part of the proceeds of the sale. And the $126k that she put into the renovations of the home could technically be pursued in civil court if she claims (convincingly) that you promised to pay her back. However, it may be argued that the contract is just for that, so the contract would actually hurt her claim for any of the $126k.
The contract does not have to be notarized. And even though you only have a copy signed by you, she has the original, and can easily affix her signature to it to make it "complete," if she has not done so already.
So the question is then becomes - is the verbiage enough to make it binding? Traditionally, a contract requires:
1) Identity of the parties sought to be charged;
2) Identification of the contract's subject matter;
3) Terms and conditions of the agreement;
4) Consideration (in most states); and
5) Signed by the party to be charged.
This contract may be deemed to be missing #4. See HERE. Consideration is the mention of the benefit in the contract. Someone in your situation may wish to argue that due to lack of consideration, the contract is not enforceable. However it would then be up to the Court to decide.
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