The following legal issue article provided by W. Adam Mandelbaum, Esquire, Attorney at Law as a public service.  If you need an experienced attorney, Mr. Mandelbaum can be reached at (516) 624-0240.

Good Faith Shown By Good Works

Mr. Mandelbaum is talking about mortgage contingency clauses in contracts.  Where a contract for the sale of real property contains a mortgage contingency clause, as long as purchasers exert a genuine effort to secure mortgage financing and act in good faith, they are entitled to recover their down payment if the mortgage is not in fact approved through no fault of their own Astrada v. Archer decided by the Second Department Appellate Division May 27, 2008.

So how as a buyer do you show good faith?  You document the hell out of your efforts to obtain financing, and you copy the seller's attorney with all documents demonstrating your actions. (Actually your attorney should be doing this).  Fire out a letter that on such and such a date you made application to XYZ funding for $x amount.  If there is correspondence from the lender stating certain repairs need to be done on the property, copy the seller's attorney.  If you get declined, immediately send a copy of the declination letter to the attorney for the seller.

Sellers are being more careful in drafting mortgage contingency clauses, and purchasers, BEFORE THEY SIGN A CONTRACT, must understand the rights and limitation of rights they have under these clauses, otherwise a downpayment could be forfeited in the event a lender does not close a deal.