A short sale is when a bank or other mortgage holder agrees to sell a property for less than is owed on it. Obviously, this is not the preferred route a lender would choose because it leaves them without the property as collateral and a balance still due on the loan.
However, in some situations a homeowner may be able to convince the lender that a short sale is in the best interests of everyone.
In order to put a short sale into motion, the homeowner normally must submit a short sale package that includes, among other things, a hardship letter detailing the exact reasons for the request.
As with any letter you write, the trick is to figure out what to include and what to leave out. When it comes to writing this type of letter, here are seven things the bank does not want to see.
Nip Hope In The Bud
When asking a lender to agree to a short sale, it is not in your interest to hold out any hope for the future. In other words, don’t offer hope (false or otherwise) that your personal financial situation might improve.
For the purposes of securing short sale permission, you’ve got to portray that you’re going down the tubes and won’t stop until you SPLAT on the bottom.
Look at the situation from their side. Why approve a short sale if there is any hope the original borrower might be able to resume mortgage payments some day?
Don’t Admit To Stupidity And Addiction
Many people find themselves holding an underwater mortgage due to events they had no control over: job loss, death, injury, illness.
If the truth of the matter is that you gambled away financial stability in Vegas or on the horses or sports, no lender will feel the slightest bit of remorse in stamping DENIED on your application.
To the surprise of no one, a predilection for booze, drugs, or bad choices will not help your cause. Normally, the truth is a good thing. If any of these vices are the reason behind your request, certain truths should remain unspoken.
No Resources And No Other Choices
Keep this idea in mind. If the lender thinks there is any avenue from which you might be able to secure money to either pay off the loan or resume monthly payments, don’t expect an approval for your short sale.
This might seem obvious, but it’s easy to let something slip unless you’re paying close attention to what you write. Maybe you have a brother with half a million in his retirement account. Would it be good strategy to reveal this fact? No!
Especially in the aftermath of the Great Recession of 2008, lenders find themselves wading through short sale requests from desperate homeowners. They don’t have time to read War and Peace and are not interested in your life story.
It would be to your great advantage to describe the hardship, explain how you’ve tried to address it and failed, and why a short sale is the only reasonable option. They are not interested in anything else. Try to keep your letter less than one page in length.
Stay Away from Templates
If you think a lender who has read hundreds, maybe thousands, of short sale letters can’t tell when you’re using a template, you’re wrong. Your best chance for success lies in your ability to craft a compelling narrative of your unique circumstances.
When it comes to unique, templates don’t cut the mustard. Something else to consider. In this print-crazy computer age, try handwriting the letter. It makes it more personal.
Blaming the Lender is a Bad Idea
This might appear self-evident, but it will not help your cause to unload all your anger and vitriol on the lender, claiming their employees are idiots and lending department run by bloodsucking moneylenders.
While both statements might be true, don’t put anything accusatory towards the lender into a short sale letter. Would you do a favor for someone who just insulted you?
Here’s a reality of pleading your hardship case. If you are current on your mortgage payments, no lender in the world will approve a short sale. In order to be taken seriously, you’re going to have to miss some payments.
It would be a good idea to mention in the letter that you are one, two, or twenty payments behind and have no hope of catching up.
The Bottom Line
The overall idea to keep in mind when you sit down to write a short sale hardship letter is that there is a living, breathing human being who will eventually read it. The more authentic you come across in writing, the better it will play when the lender sits down to contemplate a decision.
The drop-dead bottom line is you have to prove the case that it makes more financial sense for them to approve a short sale then let the property go into foreclosure. In the case of a real hardship, this should not be difficult.