Humber/Ontario Real Estate Course 4 Exam Practice

If a buyer terminates an agreement due to a poor home inspection, what document must be signed to release the initial deposit?

1. A new agreement of purchase

2. A FINTRAC compliance form

3. A mutual release

4. A termination notice

5. An inspection report

6. An amendment to the agreement

The correct answer is: A mutual release

In the context of real estate transactions, when a buyer decides to terminate an agreement due to the findings of a home inspection, a mutual release is the appropriate document to facilitate the return of the buyer's initial deposit. This document serves as a formal acknowledgment between both the buyer and the seller that the agreement is being canceled, and it outlines the terms of the release of the deposit. A mutual release ensures that both parties agree to the termination without any claims against each other, providing a clear path for the return of funds. This is important for both parties to mitigate any future disputes regarding obligations or claims associated with the contract. The mutual release serves to legally document that the buyer's decision to terminate the agreement is understood and accepted by the seller, thereby allowing for the deposit to be refunded to the buyer. Other options, while they may relate to various aspects of real estate transactions, do not serve the specific purpose of canceling the agreement and releasing the deposit in this situation. For example, a new agreement of purchase would imply entering a new transaction rather than terminating the existing one, a FINTRAC compliance form pertains to anti-money laundering regulations rather than cancelling agreements, and an inspection report documents the findings of the home inspection rather than managing the termination process