Writing a Good Short Sale Hardship Letter

If you are a seller in default on your mortgage, the short sale hardship letter is your firm communication to the lender that you intend to short sell your home.  You should make this decision only after consultation with your legal and tax representatives and a licensed Realtor so that you understand what lies ahead and the potential consequences of a short sale.  The hardship letter makes the case to your bank for approval to move forward IN COOPERATION with the bank on a short sale.  This decision should be your last resort after reviewing finances and discussing loan modifications or “work outs” with your lender.  The next step is foreclosure, and you need to tell your lender clearly that you are trying to do the right thing and work with them for a better outcome.  With a short sale, the bank loses LESS money and incurs LESS risk than a foreclosure, and you as the seller can rebuild your credit score sooner.

Your short sale hardship letter should be honest and open, clear and direct.  Any statement made in the letter should be backed up with documentation in your hardship package.  Make sure you include the following:

• First sentence stating clearly your intention to short sale your home, after difficult and thoughtful deliberation of all your options.
• Include your loan number, property address, and correct borrower names on top right corner of all pages (suggest you have a stamp made at FedEx/Kinkos or Staples, as you and your Realtor will need this on many pages throughout the short sale process).
• Explain your current hardship situation and how it came about.  Be detailed.
• Discuss measures you have taken to correct the situation (if possible).  Give the results of those actions.
• State clearly what will happen if you do not sell the home.
• List what you have included with the letter in your hardship package for supporting documentation.
• Be nice to the bank, as you need their cooperation to get through this.  No blame games or name calling.

Before sending to the correct Short Sale/Loss Mitigation/Homeowner Assistance Department contact (ask your bank), run the letter by several sets of people within your circle of trust.  Do not rush this letter, as it must be businesslike and also heartfelt.

Good luck!  As a longtime friend of mine often says, “This too shall pass.”