Selling › Selling Situations › Short Sale › Short Sale Paperwork
Short Sale Paperwork: The Package and the Hardship Letter
A complete, consistent package is the part of a short sale you control most. Here is what lenders commonly ask for, how to outline your own hardship letter, and a checklist to keep you on track.
Reviewed October 31, 2026 by George Lensch, broker, Wyze Realty. General information about Alabama, not legal, tax or financial advice.
Get Your Short Sale File in Order
As your listing brokerage, we assemble the sale documents and help you keep the package complete and on schedule. Your servicer's list and your own words still drive the hardship side.
This Guide Is General Information, Not Legal or Tax Advice
Wyze Realty is a real estate brokerage. We are not a law firm, CPA, lender or housing counselor, and we cannot tell you what to do about your specific legal, tax or financial situation. A HUD-approved housing counselor can review your hardship letter and package at no cost, and an Alabama attorney should review the approval letter if the deficiency language is unclear.
Laws, deadlines and programs change, and the right answer depends on your documents and facts. Nothing here guarantees a result, a price or a timeline. We cite our sources at the bottom so you can check them.
Most short sales that stall do so over paperwork: a missing bank statement, an unsigned form, a hardship letter that does not match the numbers, a second lender that never got the file. The good news is that this part is within your control. This guide explains what lenders typically ask for, gives you an outline for writing your own hardship letter, and includes a checklist you can print.
Your Servicer's List Comes First
Every lender has its own forms and requirements. Fannie Mae and Freddie Mac loans generally use a Borrower Response Package; other servicers have their own financial forms. Ask your servicer's loss mitigation department for its current list in writing, and follow it exactly. What follows is what lenders commonly ask for, not a substitute for that list.
The Four Parts of a Short Sale File
- The lender's application form. The servicer's financial worksheet or Borrower Response Package: income, expenses, assets and debts, signed and dated.
- Your hardship letter and proof of the hardship. A short, honest explanation of what happened, with documents that back it up.
- Your financial documents. Proof of income, bank statements and tax returns, usually for recent periods the servicer specifies.
- The sale documents. The listing agreement, the signed purchase contract, an estimated settlement statement and the buyer's proof of funds or pre-approval. As your listing brokerage, Wyze Realty assembles these with the closing attorney or title company.
How to Write a Hardship Letter: An Outline
A hardship letter is your explanation, in your own words, of why you cannot keep the home and why you are asking the lender to accept less. It should sound like you, not like a form. The outline below is a list of what to cover. It is deliberately not a filled-in sample, because a letter copied from the internet reads that way to the people who review hundreds of them.
1. The Basics at the Top
- Date.
- Your name or names as they appear on the loan (every borrower usually signs).
- Property address.
- Loan number, and the servicer's name.
- A one-line subject such as a request for short sale approval.
2. What Happened
- Describe the event plainly: job loss, reduced hours or income, divorce or separation, death of a borrower or wage earner, illness or disability, military orders or a job transfer, a large unexpected expense.
- Give dates. When did it start? When did it affect your ability to pay?
- Keep it factual. Two or three short paragraphs is usually enough.
3. Why It Is Not Temporary
- Explain why you do not expect the situation to change soon enough to keep the home: new income is lower, the household changed, the move is required, and so on.
- If you are current on payments, say so, and explain why that cannot continue.
4. What You Have Tried
- Steps you took: cutting expenses, using savings, looking for work, talking to a housing counselor, asking about home-retention options.
- Any options the servicer already reviewed or offered.
5. What You Are Asking For
- That the lender approve a short sale at the contract price (or allow you to list the home for a short sale, if you are applying before you have an offer).
- That the lender release you from the remaining balance, if that is what you are asking for. Say it clearly.
- Any specific timing issue, such as a sale date or orders to relocate.
6. Closing and Signatures
- How to reach you (phone and email), and permission for the lender to talk with your listing agent if you have signed an authorization.
- Signature of each borrower, and a list of what you have attached.
Tips That Help
- Be truthful and consistent. The letter, the financial form and the bank statements should tell the same story. Reviewers compare them.
- Do not exaggerate or leave out income. Misstatements on a lender application can create serious legal problems.
- Be brief. One page is often enough. Attach proof instead of adding more words.
- Do not include medical details you are not comfortable sharing. A general description, with documentation if asked, is usually enough.
- Ask for help if writing is hard. A HUD-approved housing counselor can review your letter and package at no cost.
Want someone to walk through the process with you before you start writing? Call (256) 808-6861 or schedule a confidential call. There is no cost and no obligation.
Proof of Hardship: Examples by Situation
Lenders usually want a document that backs up the hardship. Examples of what people commonly provide:
| Hardship | Documents that often support it |
|---|---|
| Job loss or reduced income | Separation or layoff letter, recent pay stubs showing the cut, unemployment benefit statements |
| Divorce or separation | Divorce filing, decree or settlement agreement; see selling in a divorce |
| Death of a borrower or wage earner | Death certificate; letters of administration if an estate is involved; see death of a spouse |
| Illness or disability | A letter or records confirming the condition and its effect on work, or disability benefit statements |
| Military move or job transfer | PCS orders or a transfer letter showing the new location |
| Large unexpected expenses | Bills, estimates or statements showing the expense |
Financial Documents Lenders Commonly Request
- Proof of income: recent pay stubs, benefit award letters, or, if self-employed, a profit and loss statement.
- Bank statements: recent statements for every account, all pages. Be ready to explain large deposits or transfers.
- Tax returns: recent federal returns, signed, with all schedules.
- Monthly expenses: listed on the servicer's form; keep them realistic and consistent with your statements.
- Other assets and debts: retirement accounts, other real estate, car loans, credit cards.
Lenders use these to judge whether the hardship is real and whether you could contribute toward the shortfall. Under the 2012 Fannie Mae and Freddie Mac standard short sale rules, borrowers with enough income or assets could be asked for a cash contribution or a promissory note.
The Sale Documents
Once a buyer signs a contract, the listing side sends the lender:
- The listing agreement and, often, the listing history.
- The signed purchase contract with all addenda, including the short sale addendum.
- An estimated settlement statement from the closing attorney or title company showing the price, commission, closing costs, payments to other lienholders and the net to the lender.
- The buyer's pre-approval letter or proof of funds.
- On Fannie Mae loans, the listing agent can request list-price guidance and submit offers through Fannie Mae's HomePath system.
At closing on a Fannie Mae loan, the parties sign a Short Sale Affidavit (Form 191) affirming the sale is arm's-length, meaning no hidden agreements between buyer and seller. Read it before you sign.
Your Short Sale Package Checklist
Check items off as you gather them. Your progress saves on this device, and you can print it.
Loading the checklist...
Reading the Approval Letter
When the lender approves, it sends a letter with conditions. Before you sign anything, look for:
- The approved sale price and the minimum net the lender will accept.
- The closing deadline, and what happens if closing slips.
- Whether the remaining balance is waived, released or satisfied, in so many words.
- Any cash contribution or promissory note required from you.
- The amounts allowed for commission, closing costs, a second lien, HOA and taxes.
- Any relocation assistance and how it is paid.
If the letter is silent on the remaining balance, or reserves the right to collect it, have an Alabama attorney review it before you go forward.
Keep a Paper Trail
- Log every call: date, time, the person's name and any reference number.
- Send documents through the servicer's portal or another method that gives you a record.
- Keep copies of everything you send and everything you receive, including the final settlement statement, permanently. You may need them at tax time.
- Sign the servicer's third-party authorization if you want your agent or counselor to be able to talk with the lender for you.
For the full process and the tax rules, go back to the short sale guide.
Common Questions
What should a hardship letter include?
Your name, property address and loan number; what happened and when; why it is not temporary; what you have tried; and what you are asking for, such as short sale approval and a release of the remaining balance. Keep it short and truthful, and attach proof.
Is there a hardship letter template I can use?
We give an outline rather than a filled-in template, because lenders read many letters and a copied one stands out. Use the outline and write it in your own words. A HUD-approved housing counselor can review it at no cost.
How long should the letter be?
Often one page is enough. Attach documents that prove the hardship instead of adding more explanation.
What is a Borrower Response Package?
It is the application Fannie Mae and Freddie Mac loans generally use for loss mitigation options, including short sales and deeds in lieu. It collects your income, expenses, assets and hardship information.
Do I send the package before or after I have an offer?
It depends on the servicer. Some want the financial package early, and the sale documents once there is a contract. Ask your servicer, and starting early rarely hurts.
Why does the lender want my bank statements?
To confirm income, expenses and assets, and to see whether you could contribute toward the shortfall. Be ready to explain large deposits or transfers.
What is the Short Sale Affidavit?
On Fannie Mae loans, it is a sworn statement (Form 191) signed at closing affirming that the sale is arm's-length, with no hidden agreements between buyer and seller.
Can my real estate agent talk to my lender for me?
Usually only after you sign the servicer's third-party authorization. In a listing, the agent communicates about the sale; loan modification and other loan questions stay between you, the servicer and any housing counselor or attorney you choose.
Talk It Through, Confidentially
Big decisions are easier with someone in your corner. Whether you are ready to sell, still deciding, or just need to understand your options, call or schedule a time to talk. The first conversation is free, private and comes with no obligation. If what you really need is an attorney, a CPA or a housing counselor, we will tell you that and point you in the right direction.
Schedule a Confidential Call Call or Text (256) 808-6861
Sources
- Fannie Mae, What Is a Short Sale? (fact sheet)
- Freddie Mac, Servicing Loss Mitigation Options
- Fannie Mae, Servicing Retention Options
- FHFA, Standard Short Sale Guidelines announcement, Aug. 21, 2012 (archived)
- CFPB, Regulation X, 12 CFR 1024.41 Loss Mitigation Procedures
- CFPB, Find a HUD-approved housing counselor
Related Guides
Short Sale
Selling for less than you owe: lender approval, deficiency, 2026 taxes and waiting periods.
Short Sale vs. Deed in Lieu vs. Foreclosure
Side-by-side: liens, deficiency, taxes, redemption and waiting periods for each path.
Underwater Options
Owe more than it is worth? Compare staying, renting, paying down, cash to close or a short sale.
Behind on Your Mortgage? Every Option, Explained
Every option when you are behind, from reinstatement and forbearance to modification, selling and short sales, with a document checklist.
The House in a Divorce: Keep, Buy Out or Sell in Huntsville
How Alabama divides the house, buyouts, selling, the mortgage and the tax rules people miss.
When a Spouse Dies: The House, the Deed and Your Rights in Alabama
Survivorship deeds, the spouse's share with no will, family allowances, the mortgage and taxes.
Foreclosure Rescue Scams: How to Spot Them and Protect Yourself
How foreclosure rescue scams work, the federal ban on upfront fees, and a before-you-sign checklist.
Wyze Realty LLC, Huntsville, Alabama. Information on this page is general and educational, is not legal, tax, financial or credit advice, and may not reflect the most current law. Consult an Alabama attorney, CPA or HUD-approved housing counselor about your situation. All real estate services are provided in accordance with the Fair Housing Act.