A short sale occurs when the lender agrees to accept a buyer's purchase offer of less than the total amount of the outstanding mortgage loan while the property is in pre-foreclosure stage.

It can be an alternative to bankruptcy or foreclosure proceedings for stressed homeowners who can no longer afford their mortgage payments.

There must be a valid reason that can be documented as to why you can no longer keep your home.

The Steps:

  • With lender's approval, Homeowner/Seller signs a short sale listing agreement with a real estate agent.
  • A potencial buyer makes an offer for less than the amount of the mortgage.
  • Homeowner/Seller accepts the buyer's offer.
  • Bank/Lender also accepts the buyer's offer.
  • When funds are received, the lender releases the lien and the seller delivers the deed.

If you own Stocks and Bonds, CD's and Savings Accounts or have Equity in other properties your bank or financial institute may require you to liquidate these assets and bring the money to closing to help alleviate their loss.

Lenders will be more likely to accept the sale if you are willing to contribute in order to ease their investors loss.

About Hardship Letters.

Each hardship letter will be individually evaluated by the lender.
Your letter must be unique to your situation.
The more truthful and dramatic the better.
It must evoke sad feelings and emotions from the person reading it.

Demonstrate valid, documented reason as to why you can no longer afford to keep the house, such as:

  • Lost the job after purchasing the house
  • Have been incapacitated from work due to an illness or accident.
  • Large medical bills
  • Have to move to another city/state/country.
  • The interest rate has risen to the point that is no longer possible to make the payments

What is is not considered economic hardship.

  • Pregnancy.
  • Bad purchase decisions.
  • Moving into a smaller place.
  • Unhappy with the neighbors.
  • Buying another home.

Hardship Letter Examples:

Sample Hardship Letter
Dear Creditor: Since last (month) I am experiencing financial difficulties due to (layoff, medical problem).

Free Financial Hardship Letter Sample
A financial hardship letter explains the reasons affecting the debtor’s ability to maintain his or her financial obligations.

Sample Mortgage Hardship Letter
Dear (Ms/Mr. Brown:) We have purchased our family’s home in (date). Since then, as you know, our country has experienced one the biggest housing market crashes in history. This, combined with the rising food and gas prices and current slow down in the economy, has affected our ability to pay our bills on time.

Fraud or Misrepresentation.

In some cases the lender will investigate if there was fraud or misrepresentation during the original loan application process.

If Mortgage Fraud or Real State Fraud is exposed during the process it could bring some serious legal implications for all those involved.

Not all sellers nor all properties qualify.

The homeowner will have a hard time proving hardship and getting any bank to approve a short sale if he frequently pulled out the equity of the house and are now experiencing a financial turmoil.

Also, it is not considered an economic hardship and will not be a justifiable reason to sell the house this way just because the homeowner lost all the equity and the house is worth less than what he paid for before the market dropped.

Necessary Documents.

This is a list of documents the lenders typically request from the seller along with any lender documents for a SHORT SALE PACKAGE:

  • Hardship letter explaining the seller's economic situation and requesting the lender to do a short sale.
  • Documents supporting your financial hardship. (medical bills, termination letter, disability letter, etc...)
  • Pay stubs (2 most recent).
  • Bank statements, 401K and IRA accounts (2 most recent).
  • Federal tax returns, W2s (most recent 2 years).
  • Any lender documents from a short sale package (if available).

This list can vary from lender to lender. Some lenders provide short-sale packages, some don't. Incomplete requests are ignored or tossed away.

Lenders receive 300 to 500 Short Sales requests daily. And it takes anything from 30 to 90 days for an approval or acceptance.

If everything goes well, you might request that the bank or financial institution not report adverse credit to the bureaus.

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