A financial hardship in a short sale is an important ingredient in helping define the success of a short sale. After all, without a hardship, there would be nothing keeping us all from walking away from our obligations. Like anyone, when you've made a promise to someone, and you can't keep it, they want to know why and a bank is no different. The good news is that bank's have policies in place that deal with changes in someone's ability to pay and in many cases, forgive the obligation altogether if there is a financial hardship to back it up.
A fininancial hardship doesn't necessarily mean that you've lost a job or your family income has been compromised. Those certainly would qualify directly as financial hardships, and realize there are other 'not so direct' reasons that would also trigger a financial hardship too. A growing family for example can indirectly create a financial hardship. Food bills increase, utility bills increase, insurance costs go up, clothing expenses increase and indirectly affect a family's ability to meet their mortgage obligations. Another common example is a divorce. Neither spouse has to lose a job or experience a decrease in income, yet a divorce indirectly affects a family's ability to meet their mortgage obligations. There's typically increased expenses such as a new rent, a new mortgage, new utilities, higher commuting costs, new insurance costs, etc...and leading to increased expenses and affecting one's ability to meet their financial obligations.
It's important to realize that your financial hardship may not be directly obvious to you. You may have suffered from an illness, medical expenses, family tragedy, etc. and not aware that you may even qualify. I typically meet with my clients and interview their situation individually and help determine whether there is a reason we feel comfortable presenting to the bank.
The financial hardship is the reason why a bank may or may not decide to accept a short sale. It's the first page in the package that we send over to the bank and is the foundation for defining the entire package. The hardship is important and should be presented carefully.
Important note: It's usually at the point that a family is experiencing a significant amount of stress stemming from phone calls, letters and emails from their bank that they encounter writing their hardship letter. You're so stressed by the bank and you feel inclined to beat up on the bank for not being sympathetic to your needs. You're typically emotional and your financial hardship reflects that. What typically happens is your hardship letter puts the bank in a defensive position and you wind up arguing emotionally instead of factually and that's not the position you want to be in. This is your best chance to negotiate your position and ask for understanding from the bank and when done correctly, you'll find that behind the bank's reputation are real people that want to help given the opportunity to do so. The hardship letter is your foot in the door. It should be short, factual and to the point. Unemotional with a plea for help as an undertone. When done correctly, it sets the tone for a successful outcome.
For more information about short sales, hardships and information about your options, visit my short sale tool box.
To see a video blog and interview with Atny Seymour about hardships, please see my hardship video blog.
For other short sale video blogs, please visit my short sale video blog index. Of course, if I could be of any assistance, please ask....Thank you.