Humber/Ontario Real Estate Course 4 Exam Practice

How does the deposit with an agreement of purchase and sale typically function?

1. It must be paid through a certified cheque only.

2. It can be paid via electronic funds transfer, but not by bank draft.

3. It cannot be submitted 'upon acceptance' but can be 'herewith' or 'as otherwise described in the agreement.'

4. It ultimately forms part of the downpayment

The correct answer is: It ultimately forms part of the downpayment

The deposit in an agreement of purchase and sale serves as a demonstration of the buyer's commitment to the transaction and is typically a part of the overall down payment for the purchase of the property. By functioning this way, the deposit reassures the seller that the buyer is serious, which can be crucial in competitive real estate markets. Once the transaction concludes and the purchase price is determined, the deposit is applied towards the total amount that the buyer is obligated to pay, thereby decreasing the balance that remains due at closing. This integral function solidifies the deposit's role within the purchase agreement, ensuring that it contributes to the financial arrangement and reinforces trust between the involved parties. In contrast, other possibilities expressed in the incorrect answers either describe the payment methods for deposits or stipulate misinterpretations of the timing and acceptance of the deposit, which do not encompass the primary purpose it serves within the agreement.