Short Sale Tip # 3: The Hardship Letter

Bad things sometimes happen to good people. It is highly doubtful that the homeowner intended to default on his / her mortgage and end up in foreclosure.

Most likely their enjoyment of the American Dream of homeownership was interrupted by some tragic event.

Maybe the loss of a job, a bitter divorce, or the unfortunate untimely illness or death of a family member caused the homeowner borrower to default on his mortgage.

Whatever the catalyst, the lender wants to hear from the borrower just what happened to cause them to be in the financial situation they are in.

If the bank is going to consider taking a short sale, they need to be convinced that something drastic has happened to the borrower that will make it impossible for the borrower to recover and that it is in the bank’s best interest to accept a short sale on the defaulted mortgage.

The hardship letter should be written in the borrower’s own handwriting and it should convey a very specific theme. It should tell the bank beyond a shadow of a doubt that the borrower has exhausted all means of being able to save the home from foreclosure and that a short sale is the only viable way that the home can be sold to avoid a foreclosure sale.

The main points that the hardship letter should cover are as follows:

1. The borrower had a traumatic event that renders them not able to pay their mortgage.

2. The traumatic event has been so devastating that the borrower will not be able to resume paying the mortgage in the foreseeable future.

We find that a very well written letter that explains these details enhances the borrower’s short sale approval rate tremendously. Simply saying that the house isn’t worth what they paid, or that they don’t want to use their hard earned money to pay their bills isn’t likely to cut it.

Think about it. If someone lent you a couple of hundred thousand dollars and was asking you to take a big discount you would want to be given a very compelling reason why wouldn’t you? Of course you would!

So make sure you or your client writes a very informative and detailed hardship letter. It will make a big difference. In the entire short sale package it may be one of the only documents that actually gets read. So make it work for you.

In our documents and forms library you will find a complimentary sample hardship letter that you can use in your short sale.

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