Oregon REALTOR® Forms require the Buyer to specify in the financial terms section of the sale agreement (Section 4(g) of the Residential Real Estate Purchase and Sale Agreement) whenever the Buyer is using “Contingent Funds or Nonliquid Funds” as part of the purchase. Later in the definitions section, the terms are further defined:
- Contingent Funds: Money that will belong to Buyer with uncertain occurrence of a future event that is outside Buyer’s control, such as money gifts, proceeds from lawsuits, or a Year-End Bonus.
- Nonliquid Funds: Money that is not currently available to Buyer without some kind of transfer, such as a 401K account balances, stock, cryptocurrency, or other things of value that Buyer must first sell or liquidate before realizing a cash sum.
In other words: contingent funds are money that the Buyer gets from elsewhere, and nonliquid funds are things that the Buyer has to sell [liquidate] before they have cold, hard cash. The Buyer’s disclosure should generally say what is being used, how much is being used, and what the funds are being used on. More disclosure is generally going to be better for the Buyer’s offer because it demystifies the financing for the Seller. It’s not wrong to provide more information in this context (if a Buyer is going to be using a bank loan, that information will already be described in Sections 4d and 5 of the sale agreement, along with a requirement to provide a pre-approval letter, so it is not required to state it again in Section 4(g) but it is not a bad idea to do so). The Buyer can use Section 4(g) to explain what loan they are using, where the loan money will be utilized; other uncertain funds should also be stated [e.g. conventional loan from Bank A, in the amount of $250,000 towards purchase price; $5,000 from end-of-year bonus will be used for earnest money, typically this bonus is received by December 20.] To a Seller, the best case scenario, assuming economists are correct about the time-value-of-money, is to have a full cash buyer who shows up with a briefcase full of bills to purchase the property outright. A conventional loan, while consistently a good way to purchase property, is not guaranteed. Sometimes property doesn’t qualify, sometimes the buyer doesn’t have the right income. Telling the Seller up front, “Hey, I’m using the following methods to pay for the property,” will ensure the deal proceeds more smoothly.
When you have more erratic forms of financing, the disclosure is all the more important. If the Buyer is planning to purchase the house by cashing out their supply of NFTs, or by selling a family heirloom Rembrandt painting, the Seller will need a disclosure. Many transactions have been started on the pretext of being “all-cash” when the Buyer is actually cashing out their retirement portfolio or mutual funds. In many of those situations, the Buyer [and by extension their agent] march forward through the transaction blithely unaware of the risk until something goes wrong: the stock market crashes because a boat gets stuck in the Suez Canal; they forget that there’s a fee for early draws from the retirement account; they did the math wrong; Twitter gets purchased by an eccentric billionaire and their Twitter-stock based nest egg cracks, etc. When that happens, the Buyer has to sheepishly explain to Seller that the “cash purchase” was really more like a “cash purchase, assuming the assets sold for the previously predicted number that is no longer accurate.” The Buyer will lose the earnest money in those transactions in part because they failed to inform the Seller that the Buyer’s statement that they were using “all-cash” in reality had a Barry Bonds-esque asterisk next to the term.