What is a Short Sale Letter?

A short sale letter is typically required before a homeowner can sell his property for less than he owes. The letter is addressed to the lender and can outline the reasons that the bank will benefit from accepting less money than is owed. These are often known as hardship letters, since they serve to inform the bank that the homeowner can not afford to pay his mortgage. When faced with the lengthy and costly process of foreclosure, a bank will often choose to accept a short sale. Whether or not the bank accepts this situation often hinges on the content of the short sale letter.

Short sales are real estate transactions that involve a home or other property being sold for less than the lending institution is owed. This situation would typically result in the seller continuing to owe money to the lender or the lien not being satisfied. In many cases, a homeowner that is facing a short sale can not afford his mortgage and will eventually have to default on his loan. Since he will then stop paying any mortgage at all, this process results in the bank losing money until the home can be foreclosed on and sold. Many foreclosed homes end up selling for less than was owed.

In order to avoid this entire process, the homeowner can compose a short sale letter to send to his lender. These letters typically outline the borrower's financial situation and why he will no longer be able to pay his mortgage if he can not sell the home in a short sale. If the borrower has lost his job, incurred unexpected medical expenses, or undergone other financial hardship, the letter will usually address these factors. The borrower will then usually explain any problems with the local area that could lead to a difficulty in selling the home for as much or more than is owed on it.

The local real estate market may be discussed in a short sale letter, especially if there are a large number of similar homes available at or below the borrower's mortgage balance. Other factors, such as increased property taxes and levies, may also be mentioned, since these factors can raise the overall carrying costs of home ownership. Increases in crime or other similar factors may also be discussed, as they can adversely affect the ability to sell the home. If the short sale letter manages to convince the lender that they will save money by accepting less than is owed on the loan, the lender will often respond positively.