Monday, January 2, 2012


When working with short sale candidates, the most daunting task always seems to be writing the hardship letter. All homeowners requesting a short sale are required to provide the lender with a hardship letter. The hardship letter is your best, and only, opportunity to explain to the lender why you are no longer able to afford your mortgage payments. Most real estate professionals make the mistake of viewing the hardship letter as a mere formality, or simply one more document amongst the many requested by the lender. That is a poor assumption and one that could prove costly at a later stage in the short sale process. It is no secret that banks are approving more short sales than ever before, but they are also rejecting short sales if they feel the homeowner’s hardship is insufficient. As someone with a high short sale success rate, I can honestly say that a well-crafted letter, written by the homeowner, can be the determinative factor in getting the lender to agree to a short sale. Even though I have been negotiating short sales for about five years and reviewed hundreds of hardship letters during that time, I am still unable pinpoint what exactly makes a great hardship letter, but I can tell you a few things to avoid when presenting your short sale hardship to the lender:

Don’t use a form letter or download one from the Internet

The loss mitigation department reads hundreds of hardship letters each and every day. You don’t need to be a great writer, but you should be able to tell the lender, in your own words, why you are requesting a short sale. The lender does not care about your grammar and they certainly don’t care whether your letter is typed or handwritten. The loss mitigation representative has one objective and that is to determine whether you qualify for a short sale. If you can’t take the time to write your own letter, they probably won’t take the time to read it.

Don’t try to explain your hardship

Every letter the short sale department reads attempts to explain the unfortunate circumstances surrounding the inability to make the mortgage payments. Instead of focusing on the effects of the financial hardship, an effective letter should state the actual hardship event, such as divorce or loss of job, and move on to the next paragraph. If you are writing a hardship letter, the reader already knows that you are having trouble making your payments. Your job is to tell them the reason why you are no longer able to make your mortgage payments, not to get them to feel bad for you.

Don’t blame others

Even if a loan officer from a bank convinced you to refinance and you used the equity in your property to pay off your student loans, this is not relevant to your request for a short sale. Instead of blaming others, take responsibility and stress the fact that some event, which was outside of your control, caused your financial situation to change such that you are no longer able to afford the mortgage payments. The financial documents you provide should support this assertion.

Don’t blame the poor economy or collapse of the real estate market

If the real estate market didn’t collapse, the person reading your letter wouldn’t have a job. There are other ways to tell the bank representative that your property is no longer worth what it once may have been. Instead of blaming the poor economy, it may be more effective to highlight the fact that the property has been on the market at full price for over a year and you only received one offer. Showing the bank that you at least attempted to sell at a higher price only substantiates the current short sale offer price. The bank will examine a multitude of factors, including how long the property has been on the market and whether you have lowered the asking price, in order to determine whether you qualify for a short sale.

Don’t write a novel

Some of the most effective hardship letters are no more than a few sentences long. Keep in mind, the person reading your letter most likely has hundreds of other files similar to yours. The sooner you can present the reader with your hardship reason, the more likely they are to approve your hardship request. Even if you have a great hardship reason, if you bury it on page three of you letter, the lender is less likely to read the pertinent portions of your  letter. In fact, some of the most effective letters are actually those which bullet-point the hardship reasons and simply refer to the financial documents as proof that you can can no longer afford the home.

Admittedly, there is no magic formula to writing an effective hardship letter, but if you can avoid some of the above-referenced examples and present the lender with a concise and informative letter,  you will greatly improve your chances of getting your short sale approved.  The hardship letter is one of the first documents the loss mitigation department reviews,  so if your letter fails to convince the lender that you are a qualified short sale candidate, it is highly unlikely that any additional information in your application will prove otherwise.

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