Writing the Short Sale Hardship Letter

Colleen Kulikowski April 8, 2015

Writing the Short Sale Hardship Letter

Today, I want to talk about a small but important piece of the short sale – the hardship letter.

This is the one time you really need to look at the situation through the bank’s eyes. They have taken all the risk and ultimately decide if the transaction is going to go through.The hardship letter needs to be very compelling and very descriptive in explaining why the borrower has defaulted on the loan. Note: descriptive doesn’t mean write a novel; it means give dates and reasons, and really try to play to the emotions of the bank. As if a bank has emotions, right?

It’s essential to take the lender through the why, what, how, and future of the problem. The Why is where you explain why the borrower defaulted on the loan. If they defaulted because of something of a serious nature, it makes the case stronger. Here are just a few of the reasons why.

  • Death
  • Divorce
  • Illness
  • Job loss
  • Job transfer

Always be honest and don’t make anything up just to try to win them over.

The What is what exactly happened to cause the default and when it happened. Give dates of when it happened so you can paint a picture of the steps to the default. Every foreclosure happens from a chain of events so give them those important details.

The How are the things they did to try to correct the problem before they went delinquent. This could be selling off belongings, getting extra jobs, or putting the home up for sale to avoid the dreaded foreclosure.

And last is the Future of the problem. The bank is going to ask if this is a temporary problem or something that will have lasting effects where a short sale is necessary. In cases of serious illness, death, or divorce this will often weigh heavier because it’s more of a permanent situation and the bank will look at it from that perspective.

Sometimes a person is able to get back on their feet and find a new job or change their situation; if that’s the case, selling the home isn’t the best option. This is where a loan modification comes into play.

There are so many pieces to a good short sale package but you’ll always want to make sure you present a solid, thought-out, and well-orchestrated hardship letter. Keep it under two pages; one page is ideal. It’s also a great idea to hand write this letter and sign it at the bottom. Be kind, courteous, and ask for their compassion.

Even though you feel like a case number when you talk with the bank, just remember an actual human will read over this letter and present it to a group of decision makers.

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