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Short Sale : How Do I Write A Hardship Letter?

06 Dec

Short SaleThere are alternatives to bankruptcy or foreclosure for home owners who can no longer afford to keep mortgage payments current – It’s called a “short sale”. A short sale is when a property is sold for less than its remaining mortgage principal balance, and executed as a way for both the existing homeowner and mortgage lender to cut their respective losses.

Typically, although not always, short sales are reserved for situations of extreme financial hardship; just prior a bank beginning foreclosure proceedings.

Short sales are not automatic, however. Homeowners must often prove the merits of a short sale to their lender, which often involves documenting that selling the home for less than its worth is the best and most viable option for all parties involved. Take it from someone who knows better than most in Sacramento, “a short sale is not always a pleasant transaction”, said Elizabeth Weintraub of Lyon Real Estate in Sacramento.

The short sale process starts with a letter of hardship. Here is a great link to an article by Weintraub on “how to” write a good hardship letter.

To prove your short sale worthiness to the bank, you’ll be asked to submit a cover letter which explains your hardship, and to provide full financial disclosure. You will also need your original purchase contract, a balance sheet of your income and expenses, your asset statements and proof of income, and two years of federal tax returns.

Lenders prefer handwritten letters and are more apt to agree to a short sale for homeowners who may have lost jobs or encountered significant medical bills, as opposed to those who engaged in careless spending.

Draft a compelling letter and avoid extraneous details, but do throw in as much as you can that pertains to your hardship. If your wife can’t work because of a back injury, if your dog was hit by a car and the vet bills are mounting, if you are working two jobs just to put food on the table and send money to your ailing mother, put it in your hardship letter.

As Weintraub stated so perfectly, “Use simple words geared toward the education of a 6th grader. If you don’t feel sorry for yourself by the time you have finished, maybe you didn’t do the job right.”

In addition, note that the following traits can help speed your short sale approval :

  • The home is marketable
  • A second lien holder, if one exists, is amenable to short sale proceedings
  • A foreclosure is not scheduled within the next four months

Choosing to short sale your home in Sacramento or anywhere else , though, is not something which a homeowner should pursue alone.

The process of selling a home in a “distressed” state is much different from selling a non-distressed home. Homeowners selling in a short sale should seek the advice and counsel of an experienced real estate agent.

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