Humber/Ontario Real Estate Course 4 Exam Practice

What must occur if a buyer cancels an agreement due to an unsatisfactory home inspection?

1. Both parties must sign a mutual release to return the initial deposit.

2. The brokerage can skip the FINTRAC identification verification process.

3. Both initial and supplemental deposits must be refunded.

4. No need for a trade record sheet as the transaction is voided.

5. No written record is required.

6. Only initial deposit needs to be refunded.

The correct answer is: Both parties must sign a mutual release to return the initial deposit.

When a buyer cancels an agreement based on an unsatisfactory home inspection, a mutual release is necessary to officially terminate the agreement and allow for the return of the buyer's initial deposit. This process ensures that both parties formally agree to the cancellation of the contract, protecting the rights of both the buyer and the seller. The need for a mutual release is important because it creates a clear understanding that the agreement is no longer in effect, and it documents the terms under which the deposit is returned to the buyer. This is crucial in real estate transactions to avoid any potential disputes in the future regarding the status of deposits and contractual obligations. In contrast, skipping the FINTRAC (Financial Transactions and Reports Analysis Centre of Canada) identification verification process, or the assertion that no written record is required, would not uphold the necessary legal safeguards and documentation standards of real estate transactions. Additionally, whether both initial and supplemental deposits need to be refunded hinges on the contractual agreements, often necessitating the mutual release to clarify such terms. Finally, simply stating that a refund of only the initial deposit is required does not encapsulate the need for formal agreement on the release of the contract, which is why the mutual release is vital in this context.