Short Sale Letter

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Whether you are working out on a loan modification or preparing your home for a possible short sale, a short sale letter is one of the first requirements that you need to submit to your lender. Also called a hardship letter, a short sale letter is a written explanation on why you have fallen behind on your mortgage payments. It includes a detailed account of the issues that has damaged your financial health.

The purpose of a short sale letter is to convince your lender that your current financial situation is in dire straits and that you are eligible for a short sale so you can avoid having the property being foreclosed. Because lenders’ loss mitigation representatives have to assess and process a huge number of short sale applications, you should refrain from writing a very long short sale letter with a tiring narrative. A short sale letter must always be direct to the point but still keeping all the important details of your hardship situation. Remember however that the short sale letter is just one of the many requirements that you have to fulfill to your lender.

For a short sale letter to have a relevant hardship, a homeowner’s financial adversity must be any of the following:

  • Job loss or relocation
  • Health issues
  • Death of spouse or co-borrower
  • Reduced net income
  • Business (non-real estate) bankruptcy
  • Divorce or separation
  • Decrease in working hours
  • Loss of child support for a single parent
  • Short- or long-term disability
  • Damage to property (Acts of God)

Not all hardships are acceptable to majority of lenders though. If the lender deems that you do not have a valid hardship then you will not be qualified to have a short sale. Among these include:

  • Legal issues
  • General economic slowdown, investors with multiple homes, recent cash-out refinance
  • Borrowers who want to walk away from their homes even if they are earning well
  • Borrowers with enough deposits in the same bank
  • Victims who lent their money to swindlers


Your short sale letter must be composed of the following parts:

  • Date
  • Loan number
  • Property Address
  • Hardship
  • Supporting details
  • Your proposal
  • Attachments (supporting documents)

To make your short sale letter effective, here are a few tips that you should observe:

  1. Keep your short sale letter brief and direct to the point.  One page is enough.
  2. Every person listed as a borrower on the loan needs to sign even if the person’s name is not on the house.
  3. You must be honest with your explanation.
  4. Your claims in your short sale letter must correspond to the dates that you missed your payments.
  5. Your explanation must contain your willingness to participate in the short sale process.
  6. Enclosed documents must be always complete and have relevance to your hardship.
  7. Lenders are not supposed to feel sympathetic on your hardship but they have to be convinced that you deserve to go on a short sale. These two have a big difference.
  8. Your short sale letter must also have supporting documents or evidences of hardship should the lender ask for these documents.


Here’s an example of a short sale letter.


Property Address:  1234 Happy St.,  Sunny City, CA 12345

Loan Number:  012345

To Whom It May Concern:

I am writing this letter to explain my unfortunate set of circumstances that have caused us to no longer be able to afford our mortgage payment.  I was in an auto accident last year and lost my job.  I am now disabled and will not be able to go back to work anytime soon.  My wife can’t get a second job because I can’t take care of the kids in my condition and my car was repossessed six months ago.   We have done everything in our power to make ends meet but unfortunately we have exhausted all of our savings in the attempt to fulfill my obligations with my creditors. It seems that our only option at this point is to do a short pay.

I put my house up for sale in January 2010 at a listing price of $350,000. While there are some repairs needed, no one has expressed his interest in purchasing the home even if I had already lowered the price to $290,000 in May 2010. My property is already worth 35 percent less than what I had paid for it. Up to now, I have only received one offer.  I would like to avoid foreclosure by any possible means.

I haven’t had the money to keep up my house or pay for the repairs it has needed.  We have buckets in each room to catch the water when it rains and my brother-in-law is going to try to put a canvas or tarp over the roof this weekend to help out.  Many attorneys advised us to file bankruptcy, so we could live free for two years.   Please work with this buyer, who is willing to pay more than anyone else has offered for the property in its’ current condition.  He is the only person who has given me any hope and any reason not to file bankruptcy.


Thank you in advance for your time and consideration in this matter. I am looking forward to working with you.


Borrower’s Signature


A short sale letter can definitely increase your chances of having your lender approve a short sale for your property. Remember that more than anything else, the lender will assess your situation and it is only through a valid hardship in your short sale letter that you can take the first step in your short sale goals.

If you still have more questions or concern how to prepare an effective short sale letter, give us a call.  We would be glad to assist you how to prepare an effective short sale letter.  Rather be safe than be sorry.