In the American real estate sector, the percentage of home owners that resolve financial foreclosures through home short sales is greatly increasing. This is because home short sales have proven themselves as a great channel to walk out the door with a graceful, decent exit. Repossession of a home entails self-embarrassment, social stigma, and financial persecution in future transactions, so home owners will certainly do anything to avoid these consequences.

Home short sales can occur when the home owner has to sell his/her property in order to pay the lender the loan that he/she owes. It is called a “short” sale because the payment is “short” of the total amount that the home owner must give. For instance, if a home owner has a house that is worth 90,000 dollars, but has a loan due of 110,000 dollars, what he or she will do is to sell the property, give the 90,000 dollars to the real estate mortgage lender, and ask the lender to forgive the lacking 20,000.

Lenders will only allow home short sales if they are convinced that the home owner really does not have any resources through which he or she can pay the lacking amount. This is why one of the most crucial documents in home short sales is the hardship letter.

In this letter, the home owner must clearly explain to his or lender the reason of the financial setback, persuading the lender that a short sale is the best solution to avoid the default. It is in this letter where emotions and social dynamics come to play, as lenders will turn in their decisions out of their good relations to the home owner.

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