The short sale hardship letter is one of the most important elements in orchestrating a successful proposal. Short sales are an alternative option for people facing foreclosure. This type of arrangement is made between the homeowner and lender and allows the borrower to sell the home for a lesser amount than is owed on the mortgage note.



A well-crafted short sale hardship letter can significantly increase your chances of having your offer accepted. Recent reports claim foreclosure rates are rapidly escalating. Some areas report increases as high as 57-percent.

Today, lenders are receiving short sale offers at an alarming rate. Experts suggest only one out of ten proposals are accepted. In order to stand apart from the crowd it's imperative to create an organized and well-documented short sale package.

In order to apply for a short sale, the first thing you'll need to do is contact your lender's Loss Mitigation Department. Individuals who work in this department are known as Loss Mitigators. A personal mitigator will be assigned to your account and will work with you to resolve the situation. They may offer other options prior to allowing you to apply for a short sale.

Organizing a short sale package will vary from lender to lender. However, most will request the following:

1. Financial Statement providing proof of income and expenses

2. Hardship Letter

3. Recent checking, savings and investment statements from all borrowers

4. Documentation proving the real estate listing information of the property

5. Signed Sales Contract

6. Estimate Settlement Statement (HUD-1)

7. Proof of buyer's financing

Keep in mind that lenders and banks are in business to make money. Accepting a short sale offer will cause them to incur a loss. The contents of your short sale package must prove to your lender you are incapable of maintaining your mortgage payments. You need to show them how accepting your short sale offer will benefit them. How do you accomplish this?

First, gather your financial records including bank and credit card statements, utility bills, medical expenses, child care, food, gas, insurance, auto loans, etc. Create a spreadsheet to show where you spend your money. It doesn't have to be fancy, but should be broken down by month to provide a detailed overview of where your money goes.

Do not charge unnecessary expenses to your credit card or take out loans for a minimum of three months prior to filing your short sale offer. If your lender notices you purchased expensive jewelry, took a vacation or spent $100 at a fancy restaurant, you can pretty much kiss your offer good-bye. This is not to be interpreted as suggesting you hide these charges. In your hardship letter you can express your remorse and explain the steps you are taking to change your spending habits.

Organizing your information beforehand will provide beneficial insight that you can include in your hardship letter. If you're facing foreclosure, chances are you are embarrassed by the situation. You might be tempted to hide or sugar-coat the truth. However, when it comes to a short sale, the Hardship Letter is the document that can make or break your deal.

Experts suggest hand writing your hardship letter. A hand written letter on notebook paper is more effective in sending a message that says, "I need help." If you have illegible handwriting, ask someone to hand write the letter for you.

Use a business-style format when writing your letter. At the top include the date, your name, address, phone number and email address, if you have one. Next include the name of your lender and your loan number. At the end of the hardship letter include your signature and the signature of any co-signers, if applicable.

The body of the hardship letter will be used to tell your story. This is the place to explain the series of events that caused you to fall into financial ruin. It should present an emotional plea that says, "I am in distress and I need your help." Close the letter by expressing gratitude and thank them for taking time to review your offer.

If you believe short sale is a good option for you, consider working with an experienced professional. They can assist you in organizing your offer and become involved in negotiations with your lender.