Humber/Ontario Real Estate Course 4 Exam Practice

What is a commission trust account?

1. Is separate and distinct from the real estate trust account.

2. Is used for distribution of excess real estate trust account funds back to the seller.

3. Is used for distribution of remuneration to the brokerage and its employed representatives.

4. Can be used to return a deposit to the buyer in the case of a canceled sale.

The correct answer is: Is separate and distinct from the real estate trust account.

A commission trust account is a specific financial arrangement utilized primarily in real estate transactions. This account is designed to handle commissions that are received by a brokerage prior to their disbursement. It is separate and distinct from the general real estate trust account that holds client funds, such as deposits and down payments. The purpose of maintaining a separate commission trust account is to ensure clarity and proper accounting for both commission payments and client funds. By segregating these funds, it helps provide an additional layer of protection for client money and ensures compliance with regulatory requirements regarding how different types of funds should be handled. In contrast, the other options deal with varying forms of fund disbursement but do not accurately describe the function and nature of a commission trust account itself. For instance, the distribution of excess funds, remuneration to the brokerage, or returning deposits would typically fall under different financial management practices or accounts entirely. This specialization of responsibilities within trust accounts is crucial for ethical and legal standards in real estate practice.