The One Document That Can Make or Break Your Short Sale Approval

When it comes to short sales, there’s one document that can make the difference between a smooth approval and a flat-out denial — and it’s not the contract, the HUD, or the bank’s net sheet.

It’s the hardship letter.

This simple, 1‑2 paragraph statement can be the deciding factor in whether your lender agrees to accept less than what’s owed on your mortgage. And yet, it’s often the most rushed, under-thought, or misunderstood part of the short sale package. Let’s change that.

### What is a Hardship Letter?

A hardship letter is a short, personal statement explaining why you can no longer afford your mortgage and must sell the home in order to avoid foreclosure.

At one point, you were able to make the payments. Then something changed — a job loss, medical emergency, divorce, relocation, or another life event — and now you can’t.

Your hardship letter connects the dots for the lender, showing them there’s a valid, long-term financial hardship that justifies approving the short sale.

### Why It Matters So Much

Banks and mortgage investors don’t approve short sales just because a homeowner *wants* to sell — there has to be a verifiable reason you can’t continue paying the loan.

Your hardship letter:

- Sets the tone for your entire short sale review.

- Humanizes the file, turning a stack of paperwork into a real story.

- Supports other documents like pay stubs, bank statements, and tax returns.

- Helps the lender check a key approval box: “Is there a valid, ongoing hardship?”

Without a convincing hardship letter, even the best-priced offer and cleanest file can stall.

### How to Write a Strong Hardship Letter

You don’t need to be a professional writer. In fact, the best hardship letters are straightforward and honest. Keep it to 1‑2 paragraphs and include:

1. **Your situation before the hardship** – Briefly explain that you could afford the mortgage when you bought the home.

2. **What changed** – State the specific event or events that caused your income to drop or expenses to rise.

3. **Why selling is the only option** – Make it clear that a short sale is the only way to avoid foreclosure, and the hardship is long-term.

**Example:**

"When I purchased my home in 2016, I was fully employed and able to comfortably afford the monthly payments. In January of this year, I lost my job due to company downsizing. While I have been actively seeking new employment, my current income is not enough to cover the mortgage, utilities, and basic living expenses. I have depleted my savings and fallen behind on payments. Selling the home through a short sale is the only option to avoid foreclosure and further damage to my credit."

### Common Mistakes to Avoid

- Being vague — “I just can’t afford it anymore” isn’t enough.

- Over-explaining — Don’t turn it into a life story; stick to the facts.

- Blaming the lender — Keep it professional, not emotional.

- Forgetting to sign and date — Most lenders require a wet signature.

### Forms vs. Free-Written Letters

Some lenders require you to complete their specific hardship affidavit form instead of a free-written letter. Others will accept either. Always check your short sale package requirements — sending the wrong format can delay the file.

Even on a form, your written explanation should follow the same structure above.

### Final Tips for Success

- Sign and date the letter in ink unless your lender specifically allows electronic signatures.

- Be truthful — lenders can and will verify your financial hardship.

- Submit it early with your short sale package to avoid delays.

The hardship letter may be short, but it’s a make-or-break document. Done right, it shows the lender you’ve experienced a legitimate, lasting change in circumstances — and that approving the short sale is the most reasonable outcome for everyone involved.

For more on boosting your reputation as an agent, check out our pos on **5 Ways Short Sales Can Actually Boost an Agent’s Reputation (and Repeat Business)**.

And if you’re looking to keep your sale on track, don’t miss **How to Win Over a Short Sale Buyer**.

Why Your Short Sale Offer Got Rejected—and What to Do Next

Spoiler alert: it probably wasn’t because the buyer lowballed.
(OK… sometimes that’s the case.) But more often, the deal dies for reasons nobody expects—reasons that can be totally avoided with the right short sale strategy.

I’ve been processing short sales for over 15 years. And after seeing hundreds of files, I can tell you the top 3 reasons a short sale offer gets rejected by the lender—and how you can fix them fast.

If you're a real estate agent, investor, or even a homeowner trying to sell short, this will save you time, stress, and frustration.

1. Bad Appraisal or Valuation (a.k.a. “Death by BPO”)

Let’s start with the big one. The most common reason a short sale offer gets denied is simple: the bank thinks the property is worth more than your offer.

Why? Because they got a bad valuation.

It might’ve been a drive-by BPO. Or maybe the appraiser walked through the house for five minutes, didn’t realize the HVAC is shot, and used that one flipped comp down the street as their baseline.

Here’s how to stop this from happening:

Make sure the appraiser or agent doing the BPO can't access the property without going through the listing agent first.

Seriously. This one small step can change everything.

• They can meet the appraiser on-site.
• They can bring their own comps and walk them through the pricing strategy.
• They can share where offers have been coming in.
• They can point out the condition issues that don’t show up in the MLS photos.

All of this helps anchor the final valuation close to your offer price—so the lender doesn’t come back and say “too low, denied.”

And let’s be real… once the value comes in too high, you’re in for weeks of fighting or the deal dies altogether.

So if you’re listing a short sale, or submitting an offer on one, lock down that access. It’s the best move you’ll make all month.

2. Missing Documents or Slow Turnaround

This one hurts because it’s 100% preventable.

A short sale doesn’t get approved just because you submitted an offer. It gets approved because the file is complete and the bank has everything they need—up front.

Yet I still see files sit in limbo for weeks because one form is missing. Or a seller didn’t sign the updated hardship letter. Or the buyer didn’t respond to an updated approval notice.

Here’s the deal: the review clock is always ticking. And once the bank sends a doc request, you’ve got a very small window to respond before the file is kicked back or closed altogether.

So how do you avoid this?

• Get all required documents in at the very start. Not 80%. Not “most of it.” Everything.
• If you know there’s a slow-moving client or an investor who likes to “ghost” their inbox, don’t wait—stay on them like clockwork.
• Don’t assume you’ll have time to collect more later. Because if you’re missing a pay stub or HOA doc when the file hits review, the underwriter’s just going to move on.

Short sale processing is a game of momentum. You want the file so clean and complete that when the lender opens it, they can’t help but keep moving it forward.

The less friction, the faster the approval. Period.

3. The Buyer or Seller Flakes Out Before the Finish Line

Here’s a truth nobody likes to admit: sometimes the short sale doesn’t fall apart because of the bank. It falls apart because someone gets tired of waiting.

Maybe the buyer finds something else. Maybe the seller doesn’t understand why it’s taking months. Or maybe both sides just stop caring and walk away.

That sucks—especially when you're already 60 days into the process.

So what’s the fix?

Overcommunicate.

I don’t mean blast them with hourly updates. I mean set expectations early and repeat them often:

• “Here’s where we are.”
• “Here’s what we’re waiting on.”
• “Here’s what happens next.”
• “And here’s how long it’ll likely take.”

Let the seller know you’ve got their back and that you're working the file. Let the buyer know that silence doesn’t mean the deal is dead.

And when there are updates—good or bad—share them quickly. Buyers and sellers are way more likely to stick it out if they feel informed and included.

Short sales don’t need to be stressful. But when nobody’s talking, people assume the worst. And assuming the worst usually leads to pulling out.

Final Thoughts

Short sales get rejected all the time—but most of the time, it’s avoidable.

If you’re serious about getting approvals, it comes down to 3 simple things:

1. Control the valuation.
2. Submit a full, clean file up front.
3. Keep everyone updated.

That’s it.

If you can do those three things, I promise your approval rate will shoot up—and you’ll close way more deals than the average agent or investor.

And if you need help managing the back end of all this—I’m here for that too.

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Need help with a short sale?

I’ve helped agents and sellers close over 100 short sale deals across the U.S.
Let me make your next one smoother, faster, and way less stressful.

Start a Short Sale
📞 Call/text me: 404-300-9526
📧 yoni.kutler@ygkutler.com

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This post was written by Yoni Kutler of Crisp Short Sales, a short sale expert with 15+ years of experience helping homeowners, agents, and investors close deals fast.
You’re welcome to republish this post with credit and a link back to the original.