This is a good sample letter.  It gives sellers an idea of how to go about writing one that can, hopefully, make a difference in their situation.  Thanks for sharing it!

Leanne - you're welcome.  Yes it is a sample and all situations are different but to put it into words and let the lender get a visual of what is going on will help them understand the situation better.

Outstanding..  Thanks for the info..

BOOKMARKED

Eric - you're welcome and thank you.

My agent who has had no experience in short sale is putting it on the market first before approaching the lender for a short sale.  Another agent said that my agent is doing it in reverse.  What is your recommendation?  SOS.

great post ,loved the letter

T Stinnett - That is how I do it.  I list the house at the fair market price or for what the house is worth and I put it under short sale.  However, the important thing is to note that it is Short Sale with lender approval.  Sale/Commission is upon lender approval and commission will be split 50/50.  This is a good disclosure to other agents that the sale and commission is all dependent on the lender.  You must disclose.

Then at the listing I also get a letter of authorization signed by the seller and I get the form Authorization to Receive and Convey Information also.  I also get all the mortgage information such as loan # and other important information including the seller(s) social security number.  Why the social security #? Because you will need it when you call into the lender - some ask for the whole number and some ask for the last 4 digits.  I get the fax# and any other information on the mortgage. Get these signed by the seller.

Then I fax these two forms to the lender alone with a letter requesting information on the mortgage such as payoff information and short sale procedures (which means what do you need to request a short sale approval.

All the lenders that I have contacted will not discuss if short sale is possible until after you fax in a Purchase Agreement.  So what you're asking for just the procedure.

Hope this helps.  I have several posts on short sale and the procedures.  I learned them hard knocks by going into it and asking questions along the way.  Then I documented what I had to do.

Rosemary Brooks - Mother and Daughter Realty Team of Evolve Realty Group

Thank you for the information. I am going to save this letter . I did not know that we can advertise it as a short sale. I would list it at a value equal to what is owed plus commission and then when a low offer comes in tell them I have to get approval as they owe more. Thank you.

In California we have to disclose that it is a short sale and put in the disclaimers so that we don't get caught cutting ourselves on the commission.  Not sure how it works in other states.

I always put in the comments:  Sale/Commission is depended on lender approval &  Commission will be split 50/50.

This is very important, because suppose you listed at 3% or 4% broker split.  Lenders usually will only agree up to 5%.  Now you will end up with less than the buyer's agent -- if you do not disclose that the commission is depended upon lender approval!  That's how it works here.

This is a good sample letter. This will give me a good idea about how to go about writing a short sale letter. However,I have no knowledge what so ever on this particular topic.

go to mother and daughter blog, there are several short sale posts and full of information,  Also do a search on short sale and you will find a great many. 

Thank you very much. I really appreciate that.

Lanre - you so welcome!  Have a great day! or should I say have a short sale!!!

I also listed the home before preapproval of the short sale.  We received 3 purchase contracts in less than a week...incredibly, all 3 contracts came in at the same purchase price!  Our stratagy was that hopefully we could have offers to submit with the sellers completed "short sale packet" in order to expedite the lenders decision process.  Within a week of the lender receiving contracts/packet..the bank appraiser was sent out and now we will have a decision in about 3 days.  That would put the time at about 2 weeks (including weekends!)!!   

That is great news.  Please let me know the decision. lol

Rosemary--I understand why the borrower must submit a hardship letter in order to persuade the lender to agree to a short sale--to prove that a solvent borrower is not trying to eliminate part of a loan that he could pay over time.  But why does the borrower need to prove that his hardship is temporary in nature?  I understand that the borrower needs to do that to convince the lender to give the borrower a workout plan, or to temporarily hold off on foreclosure.  But if the house is likely to sell for less than the mortgage debt and the borrower has no income or assets or prospects for a job, isn't that a good reason for the lender to agree to a short sale, even if the borrower's hardship isn't temporary?  And don't lenders benefit from having a borrower in the house and helping to market it, even if the borrower can't pay the mortgage while it's for sale? 

Garland - there is no rule that the seller has to have a temporary hardship.  A hardship is a hardship.  What the lender should be looking at is:

Legit hardship (please check out my blog on: Hardship or not? that is the question....) This hardship has to be a valid and truthful account of what actually happened to caused the mortgage  problem in the first place.  Some of my sellers lost their job, got behind and now has found another job.  But the reason for the default was due to no to low income and catching up is not something they can do.  Or the loan adjusted and they cannot afford it (rather they lost their job or not). Check out that list of valid hardships.

An unquestionable hardship is certain the seller that lost their job,has no income or assets or prosect for a job. I certainly agree with that.

The sample letter is just that a sample.  You would write the incidents that cause your seller into hardship, just be certain to document a clear story of what actually happened.  Show that your seller cannot afford the house and that it would make more sense to sell it short than to go into foreclosure - both for the seller and the lender.

Now if you want a workout plan and you don't have a job. Hopeless.

If the lender approves 5%, 50/50 commision, and there is only one agent, does the agent get 5% or 2.5%.

Carol - if the lender approves 5% you get the whole commission if you are the only agent.  lender is only looking at the listing agreement where the commission agreed upon by the seller is located. Remember to ask for more than 5% and let the lender counter it down.  Good luck.

Excellent!  In Michigan, it's important to know what this letter should read.  Good to include facts, numbers, monthly bills, and a few reasons why - because whoever reading this is a person too. 

Thanks!

Dana - so true.  Also, if your seller has tried to get financing and been turned down (especially with the new "plan" just announced) --- make sure you put that in the letter.  BTW: the new plan is probably not going to hit many of people that already feel they will need to do a short sale.  Hopefully, there will be more plans that will help more people in this situation.

In the past I have represented both the buyer and seller in a short sale trasaction and they only wanted to pay me a total of 3% - it was a fight to get more - so now if I have the listing and also find the buyer I will refer the buyer to an agent in my office. I still make more then if I only had one side and it helps out another agent.

Donna got idea.  My daughter and I work together so we can do the same.  She do the buying and I do the listing.  I haven't had any problems so far with that, but I would not put it pass the lender to look at cutting here and there and commission is first.

Rosemary, It is most unfortunate but I know that the need for this type of letter does exist.

In my area we are not experiencing as tough a market as some portions of the country. Hopefully, there will not be the need for Short Sales here. From the appearance of the Maryland economy, unemployment and other factors effecting the market, we shouldn't have this problem.

Phillip that is right on.  We here in California are going through it and it doesn't look like it is going to slow up anytime soon. It is unfortunate - for sure.

I live in Florida, and is the process of writing my hardship letter to my lender. My house value decreased 40K and with an adjustable rate, my mortgage is increasing 600 per month. Would this qualify me for a short sale approval..I need some answers

Rosemary, great post and awesome sample letter. Keep doing what you do and best of luck.

Lyn, I think it is a start, remember only the lender can truly approve if your problems are hardship.  Sounds like this is something that is causing you problems with your mortgage. But it really depends on the lender. Good luck!

Rosemary

This is a hardship letter alright and sadly too many people in this country have the same story. Pity many people opt to try to sell the home themselves thinking they will save money as in this letter the person had things wrong with their house during a home sale. A experienced agent would have know how to work the repairs into the contract thus saving the owner thousands of dollars.

Instead of saving money now they are stuck in a contract with an inexperienced agent who doesn't know how to handle a short sale much less work on repair issues, the money thought to have been saved is now lost in continued payments and the value has more than likely gone down on the home.

People who are going into this situation should start on the right foot and hire the Pro's to begin with.

Nice Letter! I have about 50 others if anyone is interested, just ask:)   

Anthony Fico

This is good information.  Yes, I have a short sale currently, and we did this as well.  The hard part is that we have to wait for the bank to make a decision, which takes about 60 days

Donald, this is true the lender/bank do take their time about rendering a decision.  Did you ask them to delay the sales date or is it close enough to have to worry about it?

RoseMary:

Thanks for sharing this information with others.  I have only been in the business for a little more than a year now and working on my third short sale.  The first one went into foreclosure because no one was willing to share any information and I was only 3 months out of school with no idea where to start. the next one went into foreclosure because the seller contacted me after the bank gave her an approval to do a short sale and only 2 months to get it completed.  It was 3 weeks into the 2 months before she contacted me to help her sale it.  The bank turned down the original offer she received.  Now I'm working on my 3rd short sale, but I am initiating this one.  The lender requested an hardship letter and your letter gave me direction on where to began and how to formatt the data.  My seller has not been deliquient on her payments yet, but is moving out of the home as of 12/01 because she can no longer afford to pay for her home and eat at the same time.  Her house note has not changes, but she has been placed on disability and has utilized all of her savings trying to keep the home.  The note, utilities and upkeep of the home is just too much for her to handle on her disability income.  I've received an offer for the home less than 5K from the payoff amount.  I will read your blogg for any other information you've included in hopes to help me make this a successful sale.  I will appreciate any thing else you can share to make this a smoothe transaction also. 

Grateful,

Zelda

Thanks for sharing this, i am currently working with a seller and this was a huge help as we had no clue what to put in the letter.

Zelda - some good news and some not so good, but that is how short sales seem to go.  With this one you're working on now -- good luck and it sounds like a good deal if it is only $5k away from payoff.  Just collect all the paperwork they require for a short sale, follow up with the lender after allowing them the 48 hours to process and see if there is anything else they need and then you pray more.  I say pray more because I am assuming you were praying in the beginning!

God bless and success with your short sale.  If you need additional information, check out my blog and others on AR.

Hi Rosemary! I am one of those homeowners who are opting for a short sale due to financial hardship. Thanks a lot for this hardship letter sample. This really helps. Also, I have questions : if the property is already on the market for short sale, do I still have to pay for the monthly payments? What if there is no activity or offer on the sale like more than 2-3 months in the market? Will Deed In lieu of foreclosure works? What if there is a second mortgage on it? What happens?

Thanks in advance for taking time to answer my questions.

This one's getting a lot of views. That's awesome Rosemary!  Congrats on over 14,000 views of this post!  That is absolutely incredible!  Great job!  :-)

Rosie, I will attempt to answer your questions to the best of my ability.  But I strongly suggest you either have an agent to do this for you or you call your lender yourself and get these a clearly understanding of where you are in the process and what if anything they can do for you.

1.  If the property is already on the market for short sale, do I still have to pay for the monthly payments?  If you can pay the monthly payments you should do so.  Because you are telling the lender you cannot afford to pay, but if you are asking this question it sounds like you have the money but are just not sure if you should pay.  I cannot advise you to not pay.  If the payment is not behind -- it would be wise for you to contact your lender and try to work something out with them.  Call your lender.

2.  What if there is no activity or offer on the sale like more than 2-3 months in the market?  No offer more than 2-3 months.  I'll answer this a question with a question:  Are you in default or just trying to sell now to avoid default.  If you are in default the foreclosure timeline will dicate what will happen after 3 months of recordation of Notice of Default.  Once the default is recorded (called Notice of Default) in California you will have 90 days then a Notice of Trustee Sale Date will be recorded (allowing another 21 days) and then there will be a Trustee Sale if no offer or short sale approval is approved by lender.  This is why you should stay in contact with your lender.

3.  Will Deed in lieu of foreclosure work?  It might not be an option. It too is lender approval.  So please don't assume it is something you just chose and it happens.  Lender are hesitant to offer in lieu of and there are many factors that only the lender know that will be the deciding point of yes they will approve or nope they won't.  Call your lender.

4.  What if there is a second mortgage on it? What happens?   If there is a second, you will need both lenders to approve the short sale.  If you do a workout with the lender in default and the other loan is caught up there should be no problems.  If both loans are with the same company, you have more going for you.  Call your lender.

I hope this helps and I appreciate your stopping by and commenting.  Happy and safe holidays to you and your family.

Brad, thanks for letting me know that! 14,000 how does that work and I only have 38 comments? Somebodies don't like to write!!! smile

....but they're reading.....smile!!  :-)

Brad so true and that I appreciate and I hope that they are finding it useful.  With the market as it is now and the situation with people being forced to request short sales this should help.  I have heard so many say it is hard writing that hardship letter for a few reasons 1 being it is heart breaking to talk or write about it.  And some people are just not good at putting facts into a make sense order.  And you want that lender to understand your situation.  So I truly hope it is useful to all 14,000 in some way.  Thank you for pointing that out to me, sometimes we get caught up with the comments as a measure of how many you have touched.

Craig I am glad this was helpful in getting your client started on writing their hardship letter.  It is important for them to know that the lender will want the truth and will want to have it in some order to show what started the hardship and how it escalated to the point of a hole they could not see themselves out of in order to catch up on the mortgage.  It is also ok to let them know that you are OK now but you had the hardship and got so far behind you could not catch up.  Be truthful and give them facts they can verify.

John Occhi wrote a really good article on how he handles getting all the necessary information from a seller of a short sale right from the gate.  Check it out for the next short sale.

Happy and safe holiday for you and your family and thank you so much for stopping by.

Hi Rosemary, thanks a lot. I really appreciate taking time to answer my queries. It's really informative and great help. Have a wonderful holidays too! God bless

No problem, I'm always happy to encourage and help any way I can. You are just around the corner from us, that makes you my neighbor!  You know what they say about your neighbors!  Love thy neighbor!  :-)

Rosie - you are welcome and it makes my day if I am able to help in some small way. The short sale process is not an easy one to do, get an approval and all that.  Even doing all that is advised is no guarantee that you will get the approval, because it is up to the lender. I keep reminding everyone to please contact the lender --- since they say they are trying to help - give them the chance!  As it stands right now most will probably not be able to get help from the lender but your client just might be that one that slides through.  Good luck.  God bless.

Brad, I love you, my neighbor.

Happy Day!

awhhh shucks...  - (brad blushes)  Thanks Rosemary, that was beautiful!!  :-)

I would love to see that -- (brad blushes)! smile.  glad you liked it, its real.  Happy early morning!

This is a great letter...thank you very much!

Great Information, especially since most people are not to familiar with the short sale process.

Have a great New Year,

Philip Maltaghati

NYS Certified Residential Appraiser

Rosemary,

Many homeowners believe that a short sale is pretty simple and quick and it really isn't. The hardship letter is a key document in the process and if the hardship isn't plausible, the process stops. Your letter is a great guide.

Esko - so true.  If there is no hardship, there is no reason to approve a short sale. 

Philip ~ my goal is to inform people of the process.  It took me a long time to figure it out but sharing the information and hopefull is a  big help to others that find themselves representing a seller that has to request a short sale.  Since there is no standard format for short sale, any information put out to the public should be helpful.

As Esko said, short sales can be a very long process. Sometimes it takes up to 6 months just to find out the deal wasn't approved. A few deals I was involved with where the BPO was so high that the realtor selling the home couldn't even get buyers for the approved short sale. The sales used in the BPO were not even comparable. It's a shame that real estate agents/brokers with no BPO experience would take on BPO work from banks. In this case, the realtor could not get a lower approved short sale from the bank and the homeowner went into foreclosure. There are a lot of factors that can make or break a short sale. GOOD LUCK!

Happy New Year,

Philip Maltaghati

NYS Certified Residential Appraiser

Philip ~ so true, so many things.  I have ran into several that just didn't have a chance due to bad BPO information submitted or some other small factor.  Lenders just don't seem to care that much to help.

Hello,

 I bought a second house a year ago, I've been trying to sell it with no luck ever since, currently my house is worth almost half of what it actually cost me and my mortage went up this year from $1700 to $2500 a month due to taxes and insurance. My initial plan was not to keep this house, but to sell it for a small profit,  so I choose the simplest type of loan (interest only for the first 5 years); this being said I do not think my lender could help me any further. I'm behind 3 months on my mortgage. I do not want to keep this house:

If I ask for a short sale, and it's granted, but it doesn't sell ...how long before the houe goes into forclosure? do I have to contiue paying my monthy mortgage until the house is sold, eventhough I already received the Notice of Default and accelaration from the lender?

My other option will be a Deed in Lieu of Foreclosure. Does anyone have sample hardship letters for this?

Thank you for your help

Juan

Juan ~ Let me take the easy part first,  where do you live? California foreclosure laws are different so I don't want tell you the wrong thing. 

To answer your question from California: Normally, you will not be given short sale approval until you have a formal offer and all the other items your lender require for you to request a short sale.  If you get a verbal that its OK to do a short sale, this is true - you have the option to list and offer your home as a short sale, but until you get that lender to approval your short sale request - you have no sale.  And you would need to be sure your contract with the buyer states that your sale is upon lender's approval.

Deed in lieu of foreclosure: From what I know about DIL they don't come easy.  Usually if you ask the lender for this option... you won't get it.  But that is not the rule its just how lender have been responding to that request.  I would think the same hardship letter and financial information would be required but I would stress that you ask the lender for the requirement and procedures for a DIL (deed in lieu of foreclosure).

Timeline:  Here again, In California: you have 90 + 21 days after the Notice of Default is recorded. Unless some delays come your way.

I hope that this helps.  If not and you are not in California, let me know.  I do my best to guide you to someone in your area that can provide you the information for your state. 

I wish you the best of luck with your situation.  I know that it is not a good time and situation.

Rosemary, Thank you so much for your reply...is the first time someone gives me a straight answer, and believe me I have knocked on many doors.

Actually, I live in Miami-Florida, The house I bough is in Cape Coral - Florida; I do not know if there are any changes on your suggestionm because of this.

I'm trying to sale the house below cost right now, but at my loss.  I didn't want to be driven by this situatioin to the possition that I'm now, I was willing to loose money on this deal, but wanted it to be done and move on, but as I mentioned before no offers have come through. That's why now I'm concidering either a short sale or a DIL. 

Rosemary, if I get the aproval for a short sale by the lender, do I have to contiue paying my monthly mortgagepayments  until the house is sold? eventhough I already received the Notice of Default and accelaration from the lender?

Again thank you for your help and if you know of any one that can help me in my area I'll really appreciate it.

Great topic and dicussion! I am meeting with a Realtor tomorrow who does alt of short sales business. This will help me talk the lingo.

-Sean

Juan, I will email you on this.  But I also suggest you check with a professional on the drawbacks of foreclosure and DIL in your state.  California as are many other states ran a little differently than Florida.

I wish you much success for this situation.  These lenders are not bending much and as always be careful of virbal agreements, they don't mean much at the end of the day.  And watch your buyer too, they will change their mind at the end of the day -- before the close.   Its so many homes in inventory they feel they have so much selections so they don't wait around long.  lol

Sean, good luck with your meeting.  Walk the walk, talk the talk.

Hi all,

 I'm a homeowner trying to sell my home in a short sale, and am now 3 months behind on payments. We had one offer on the home, but it was retracted.

My questions are:

1) We have found another house that we would like to rent. I know that we are living essentially "rent free" right now, but I think our house may have a better chance of selling if it's vacant..should we move?

2) Has anybody attempted a shortsale with SunTrust and were you successful?

Thanks

Jayne

Jayne: Sorry I answered you but the system did not save it I guess.

1.  vacant home vs occupied: I could not tell you to move and if the rent is free!  Hey I think that answers your question.  But seriously there is no guarantees that your home will sell quicker just because it is vacant.  That's just my opinion.  I know it is easier for the agent probably to have it vacant, but we as agents are working you the seller and whatever works for you and your situation has to work for us.  That's how I look at it.  Have a home is that neat and presentible is important to the sell but not every household can just move out.

2.  Not sure about SunTrust.  I do some looking around to see if I can find out anything about them.  But I will say in my experience, its no telling.... some deals go smoothly and some have issues not matter who the lender is. It is like they just get up on the wrong side of the bed and tag you're the one they can be mean to and just say no to. 

I wish you the best and I am happy for you that you are dealing with your situation in a less stressful way.  I am also happy for you that you do have another place to life.  God bless you.

Hello Rosemary, Hi everyone,

I live in CA and my question is, can I request for short sale if my financial hardship is only anticipated or has not happened yet? My loan will reset in a couple of months and my mortgage payment will increase from $3000 a month to about $5000 a month? I have no late payments but I can't afford the new payment even with a part-time job that I have now plus my full time job. Do I have to wait when my mortgage resets and when i'm actually in financial hardship? Thanks for your response! 

Jay ~ You can request the short sale information at any time.  I would probably first try to see if they will do a loan workout with you on your adjustable.  If you are not in default you may qualify for the freeze that the president announced.  If they cannot do a workout plan and you cannot afford to pay your mortgage after the adjustment I'd let them know that and see what they suggest.  That's the best way to do it.  That way you're giving the lender the opportunity to help you out.

If an when you start to get behind.... list your property and get to work on finding an offer that is good enough to submit.  OR you could list it now if it is upside down and list it as a short sale.  Usually the listed time in California is up to about 3 months before you start to get hits from potential buyers.  If you definitely know you cannot afford the house once the payments go up and the lender refuse to either freeze your payments or  lower them.... this is what I suggest...

 Hope this helps.

Hi

Im very interested in trying to do a short sell on my home in california. for one, its listed as my primary residence so just want to confirm I wont have to pay taxes on the difference bank would forgive. Also, I spoke to loss mitigation rep from my lender and he couldnt send me a short sale packet but told me to send him last 2 bank statements, last 2 paystubs along with hardship letter. I get a bit confused here because he told me I need to be at least 2 months default on my mortgage to even be considered. A realtor told me this doesnt necessarily have to be. 

Also would it be better for me to see if i get any offers for a short sale price first then send these offers along with my hardship letter to the lender?

Also one more thing.....my hardship is that I'm getting a divorce and I have 2 kids, so with my upcoming alimony and child support payments that will make it very difficult for me to afford keeping my home.

Thanks in advance,

Gil

Gil: I have a mixed answer for if they will or won't take a short sale if you are not in default.  I have a couple people say they were not discouraged by the lender for asking before default.  But if that works for your lender -- obviously not.  If they told you what they require and one is that you are in default, that's the way they work it.  There are no standards, just that particular lender is calling the shots as is with other homeowners.

I'd wait until I had an offer and submit all the information that they require for a short sale approval.  Sending it now and then having to send it later is a waste of your time.  They will pre-approve a short sale, this I know.

That is a valid hardship according to all I've heard.  Just keep up with your records and write out your hardship using dates that can be verified.

Good luck. 

I'm a RE agent in CA and working on my first Short Sale.  The First is short and the Second will get 0.  Any words of wisdom on how to convince the second to accept the 0 demand??

Thanks

thanks for the letter pattern, i had no clue what to write. now i can go to bed!

Having a true hardship, there would be little need to seek "reasons" ~ the hardship would be evident and apparent. I've been asked to write such letters where the hardship is really decreasing property value! Is that truly a hardship...?

Thank You for the format.

DD~ Sorry I missed answering this for you but I hope it worked out for you.  The second is a loser either way is what they know.

Janine ~ I so glad it helped you and good luck with your situation.  Let us know how it works out for you.

Mott ~ I do not think so.  Hardship is just that, something that has happened to make your financial situation change to the point that you cannot afford the property.  We are all suffering from the market going downwards

That's a great letter!  I may use a variation of it some time.

ROSEMARY !  You are SO helpful to so many ! That is so kind of you. THANK YOU.  Could I possibly ask you a question? 

Facts:   

Townhouse in CA was primary residence 2003-2006.

In April 2006 I refinanced with an interest only loan.  Big mistake! 

In July 2006 my family relocated to Colorado and I followed being a single mother with two children and needing their help with the kids, etc.  I  rented the townhouse out and bought a home Colorado.

The loan is amortorizing, reached 110% of original $320,000 as of June of this year (currently $345,000).  

I will not be able to pay the $2500 month payments, plus $290 HOA fees, plus property taxes of $2400 annually (rent obtained monthly is $1575). 

When I moved and changed jobs my income DECREASED substantially.

I have contacted GMAC asking them if I can refinance, they said no because they purchased this loan from my original loan company I am "stuck with it."  (I am only 2 years into the 3 year pre-pay) I didn't want to short sale nor foreclose. 

Do you know anything about GMAC?  Do they usually say NO to short sales?

Since moving I got married and am so worried that my husband's credit is going to be messed up with this. I have been told it won't since his name is not on the townhouse paperwork.

My husband also has a house that is up for sale - the market is terrible everywhere. We have three mortages and are sinking fast.  

Who do I ask to look over my loan papers and possibly direct me as to short sale or foreclose. 

I realize that I will possibly be faced with a Deficiency Judgment and Taxes owed....  I am scared that I am going to lose my house here also.