Humber/Ontario Real Estate Course 4 Exam Practice

Which of the following actions must be taken if the deposit in a real estate transaction earns interest?

1. Only disclose the interest rate to the buyer.

2. Interest rate disclosure is not needed if it’s a standard practice.

3. Ensure all parties to the agreement are informed about the interest rate.

4. Brokerages should have both types of trust accounts: interest-bearing and non-interest bearing.

5. Maintain records but no disclosure is required.

6. Inform only the seller about the interest rate.

The correct answer is: Ensure all parties to the agreement are informed about the interest rate.

The correct choice emphasizes the importance of transparency and communication in real estate transactions, particularly concerning the interest earned on deposits. When a deposit generates interest, it is crucial that all parties involved in the agreement—typically the buyer and seller—are informed about the interest rate. This disclosure ensures that everyone understands how the deposit is being managed and how interest is accruing, which is critical for fostering trust and clarity in the transaction. Understanding that both the buyer and seller have a vested interest in the outcome of the transaction underscores the importance of keeping them equally informed. Each party may have different financial interests or implications regarding the interest accrued, making it essential to disclose this information to avoid any potential conflicts or misunderstandings later on. The other answer options emphasize various aspects of handling deposits, but they do not meet the requirement of informing all parties involved about the interest rate. For example, the notion that disclosure is not needed if it’s a standard practice overlooks the need for explicit communication and could lead to disputes if one party later claims they were unaware of how the deposit was being managed. Similarly, the suggestions regarding record maintenance and brokerages having both types of trust accounts focus on procedural elements rather than the necessity of transparency in interest rate disclosure to all parties involved.