How to Prepare a Short Sell Hardship Letter

If you're in financial distress, a short sale of your home may help you to avoid foreclosure and/or bankruptcy. If you're seeking assistance with your mortgage, lenders will request that you provide a hardship letter, explaining the details of your financial situation and the reasons why you can no longer afford to pay. Knowing how to prepare your hardship letter is a key step in getting your short sale approved.

Things You'll Need

• A list of your monthly expenses and statements of your income
• Relevant supporting documentation about your financial situation
• Computer with printer

Instructions

1. Compose a list of any and all events that caused you to fall behind on your mortgage payments. Include job loss, illness, relocation, divorce, death of a spouse, etc., making note of when each of the events occurred. Be truthful and include items that can be supported with documentation. Note the details of your current financial situation, including current employment, assets and other debts.

2. Format the letter properly. Include the lender's name, address, contact number and a formal greeting, i.e. To Whom It May Concern. Reference your name, account number, the property address and the date the home was purchased.

3. In chronological order, explain the events leading up to your current financial situation. For example, if your situation is due to a job loss, explain the date and nature of the loss and what steps you have taken to secure employment. If you've tried to sell the house and have been unsuccessful, detail the reasons why. Be thorough but don't embellish. If the lender suspects you are being untruthful or insincere, they may deny your request.

4. Make your plea. Explain that you cannot sustain the mortgage on your current income. Make the lender aware of your efforts to sell the house and explain why you feel a short sale is a favorable option for both parties. Let them know you are aware of the consequences of a short sale and your desire to avoid foreclosure and/or bankruptcy.

5. Attach supporting documents to demonstrate to your lenders the scope of your situation. This may include separation or divorce papers, a termination notice, medical bills, etc. While this information may not be required, it will help to support your argument as to why you need a short sale.

6. Include your contact information and a formal closing. Thank the lender for taking the time to consider your situation.

Tips & Warnings

• Be truthful. Don't fabricate information or include information that can't be verified.

• Be sincere. Let the lender know you truly regret the situation and that it is unavoidable.

• Be brief. Keep the letter to a single page in length.

• Don't point blame at the lender or the housing crisis or any other extraneous circumstances.

References

• IRS: Resources on Home Foreclosure and Debt Cancellation
• FTC: Consumer Information on Credit and Debt