Humber/Ontario Real Estate Course 4 Exam Practice

What is the primary purpose of a commission trust account?

1. Holding excess funds for future transactions.

2. Receiving and disbursing remuneration only.

3. Returning extra funds back to the seller.

4. Disbursing earnings directly to employed salespersons.

5. Handling all brokerage finances.

6. Paying legal fees from transaction proceeds.

The correct answer is: Holding excess funds for future transactions.

The primary purpose of a commission trust account is to ensure that funds received by a real estate brokerage are managed in a way that protects clients' money and maintains transparency in financial dealings. This type of account is specifically designed to hold funds related to real estate transactions, such as deposits, until the transactions are completed, ensuring that the funds are dealt with according to the terms of those transactions. Holding excess funds for future transactions is a fundamental aspect of the trust account's function. It is important that these funds are kept separate from the brokerage's operational finances to prevent commingling, which can lead to legal and ethical issues. The trust account allows a broker to efficiently manage these funds while fulfilling fiduciary duties to clients. Other options reflect actions that may occur within a broader financial context, but they do not capture the primary purpose of a commission trust account as clearly. For example, disbursing remuneration to individuals or returning extra funds to sellers is part of transaction management, but it is not the main intent of the trust account itself. The emphasis is instead on the secure holding and proper management of funds until they are needed or disbursed based on client agreements.