Humber/Ontario Real Estate Course 4 Exam Practice

If a transaction falls through, what is the role of the real estate trust account involving the returned deposit?

1. Automatically forward the deposit to the local real estate board.

2. Wait for written mutual instructions from both transaction parties before releasing the deposit.

3. Return the deposit immediately to the buyer without notice.

4. Request the seller to redistribute it per new agreements.

5. Use it for office operational expenses.

6. Don’t release the deposit until legal advice is sought.

The correct answer is: Wait for written mutual instructions from both transaction parties before releasing the deposit.

When a transaction falls through, the appropriate action regarding the handling of the deposit in the real estate trust account is to wait for written mutual instructions from both parties involved in the transaction before releasing the deposit. This ensures that the interests of both the buyer and the seller are respected and that there is clear agreement on the next steps. Real estate transactions often involve complex agreements, and a deposit typically serves as a security for the seller, indicating the buyer's intent to complete the purchase. If the transaction does not go through, it is critical that both parties communicate and come to a consensus about what should happen with the deposit. This process helps to prevent disputes and potential legal issues arising from the unilateral decision to release or retain the funds. Other options involve actions that may not adhere to standard protocols or legal guidelines. For example, automatically forwarding the deposit to the local real estate board could neglect the rights of the parties involved. Returning the deposit immediately to the buyer without notice does not take into account any agreements the seller may have regarding the deposit. Using the funds for operational expenses or redistributing without mutual consent may violate the fiduciary duty expected of real estate professionals. Seeking legal advice before any release could be prudent, but it should not delay necessary actions if mutual agreements