Hardship Letter | Imperative for Negotiating a Short Sale

Real Estate Agent with RE/MAX Town & Country Licensed in 2002

Creating a compelling hardship letter requires creativity.  Be honest, but convey that you are suffering from hardship, your situation is bleak and you do not see a way out.  This letter is very important and should be written with correct grammar, spelling and should convey your message in effectively.  Be sure to include copies of all documentation that can/will prove your state of affairs.  

  • The Seller's Hardship Letter should be at least one page long and should convey that the homeowner is in a dire situation, cannot make his/her payments and why the situation is not likely to change. 
  • You will also want to include (in detail) the cause of this situation.  Obviously the worse the situation, the more likely the short sale will be approved.
  • Be sure to attach copies of any phone, electric, cable, water, gas and credit card bills showing a past due status, notice of disconnect or turned over to a collection agency.  Make sure to mention if you have been using credit cards to live, eat and pay bills!  Copies of delinquent medical or hospital bills, divorce decree and all judgments against the homeowner, layoff notices, accident reports may also help your cause.
  • Describe your intentions with regard to the deficiency the short sale will cause.  Are you willing/able to pay an unsecured note for the difference between the amount owed and the sales price?  If so, you would need to give specifics such as how much you would be willing to pay and in what time frame.  If your finances won't allow, then specify that you will be unable to repay the debt.
  • Note where you will be living after the property is sold.  Will you be renting, living with relatives, living in a 2nd home?  Include your new contact information!


Just to give you an idea....The following are reasons that are typically accepted  by lenders in consideration for a short sale: 

  • Job or significant income loss
  • Homeowner or immediate family member has experienced an illness that has wreaked havoc on personal finances
  • Adjustment in mortgage payment (i.e. arm) resulting in homeowner no longer being able to afford loan payment.
  • Unforeseen increase in living expenses
  • Divorce (split of domestic partners) or death of spouse has occurred: income has changed and owner has insufficient income to pay loan.
  • Transferred/relocated out of area by employer and property cannot be sold nor rented.
  • Military duty for extended period
  • Suffered disabling injury and is unable to work
  • Unemployed and unable to find employment due to economic conditions.
  • Has become financially insolvent.
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Ray Nelson
Exit Realty Expertise - Fredericksburg, VA

Good points Michelle.  Many sellers want to candy coat their troubles because that is what we do in polite company.  It takes a tactful yet experienced REALTOR to get the worst details out and on paper for the mortgage company to review.  Great post!

Jun 17, 2008 02:42 AM #1
Lynn911.com ~ Dallas Real Estate Agent Top Team
Dallas Houses for Rent Dallas Apartment Rentals Lynn911.com - Dallas, TX

Matter of obtaining the stack list from the homeowner working with them short sales are difficult and can be time consuming for anyone.

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Jun 17, 2008 02:43 AM #2
Laura Giannotta
Keller Williams Realty - Atlantic Shore - Little Egg Harbor, NJ
Your Realtor Down the Shore!

Good post!  I agree but also believe the hardship letter should be in the homeowners own words (that doesn't mean we can't help them write it).

Jun 17, 2008 02:53 AM #3
Michelle Miller
RE/MAX Town & Country - Woodstock, GA

Thank you Ray!  I appreciate the compliment!  It's not always easy to get homeowner to admit just how bad their situation has become, but I have found that most are willing to give me the information rather than face foreclosure.  It is imperative that we stress the importance of giving us all the facts and telling the truth!

Yes, they can be very difficult and are always time consuming.  I feel that they are well worth it in the end as we have typically saved a homeowner from foreclosure (yea!) and made some income in the mean time.

Thank you!  I agree.  Lenders most likely see "canned" hardship letters frequently, so we should make sure that our homeowners' facts are stated, but in a way that they would write... not some form letter with personal facts thrown in periodically.

Jun 17, 2008 04:31 AM #4
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