How to Write a Short Sale Hardship Letter

If you're short selling your home, your lender will ask for a hardship letter. It's a brief explanation of what happened and why you can't keep paying, and why the lender should accept less than what you owe. It doesn't need to be perfect, but it does need to be clear. Here's how to write one.

A short sale package includes plenty of forms, but the hardship letter is the part that lets anyone at the bank pick up your file and quickly understand your situation. Lenders sometimes ask for revisions or reject letters outright, so it's worth getting right.

1. Be honest

This is the most important rule. You're simply describing your current situation to your lender. If your hardship seems ordinary compared to others' stories, don't worry, and never exaggerate. Lenders verify what you tell them, and anything that doesn't check out will only slow things down. An experienced short sale agent can tell you whether a short sale is the right path or whether a traditional sale makes more sense.

2. Keep it simple

Write the way you talk. Skip the fancy words and get to the point. One page is plenty, and often a paragraph or two is enough.

3. Explain why you can't make the payments

Sum up your hardship in a single sentence near the top, for example: "I lost my job in March and have not been able to find work in my field." Common hardships include job loss or reduced income, divorce, medical bills, death of a spouse or co-borrower, a required job relocation, or a payment increase you can no longer afford.

4. Explain what you've done to avoid this

Tell the lender what you've tried: selling belongings, borrowing from family, using savings or unemployment benefits, applying for a loan modification. It shows you've acted in good faith. If it doesn't apply to your situation, that's okay. Just leave it out.

5. Take responsibility

Even if your hardship was completely out of your control, a respectful tone helps. Acknowledge that you're unable to keep your commitment and that you're asking for their help to resolve it. Lenders are people too, and it shows you understand they're taking a loss as well.

Review it with your agent

Once your letter is drafted, go over it with your short sale agent before it's submitted. They can tailor it to your lender's requirements and make sure it matches the rest of your financial documents.

This article is general information, not legal or tax advice. A short sale can have tax and credit consequences; talk with a tax professional or attorney about your situation.