The Hardship Letter Real Estate Short Sales Time Is Running Out! Time Is Running Out!
Upside Down or owe more than your property is worth?he hardship letter sets the tone for the rest of the short sale process. As a result, it should be written in a clear, concise and convincing way. While it should, to some degree, provide the human side of the story, it should frame the personal circumstances with cold, hard facts about the borrower’s financial situation. The ultimate goal of a hardship letter is to show the bank or lender why a foreclosure is imminent, and to demonstrate a borrower’s willingness to seek out other options that are more appealing to all involved parties. When a lender finishes reading a hardship letter, he should be convinced that the borrower has no other resources available to him.
Right off the bat, the hardship letter should make it clear that a borrower cannot continue on with his current mortgage loan. The letter should put that assertion out there immediately. Soon after that point is made, the borrower should explain the changes in their life that have wrought the current crisis. For instance, perhaps the borrower has lost his job; maybe the borrower’s spouse has passed away or been laid off from work. Reduced hours and pay cuts should also be mentioned at this point. In other words, the borrower should show that they are financially unable to fulfill the terms of the mortgage loan.
After explaining why he is unable to make his monthly mortgage payments, the borrower should outline the results of his property/loan evaluation. In plain terms, he should explain what the current value of his house is. At the same time, he should emphasize how much is currently owed on the mortgage loan. The contrast between the value of the house and the amount that is owed should clearly show the underwater, or upside-down, nature of the situation.
Finally, the borrower might want to include other alternatives that he has considered. By doing so, he will show the lender that he has earnestly been looking for other ways to handle his financial responsibility, such as refinancing, getting personal loans or attempting to sell the home. Ultimately, however, he should show that he has two options left: a foreclosure or a short sale. As the letter wraps up, the reader should be left with a clear understanding about why the borrower needs to pursue a short sale. While writing the hardship letter, the borrower needs to remember that all of his points must be backed up by proper documentation; everything will be sent to the lender as a part of the short sale package.
An sample hardship letters can be found in our Homeowners section.