Humber/Ontario Real Estate Course 4 Exam Practice

Which statement is true concerning negotiations and deposits?

1. A deposit cheque must be certified to display good faith.

2. A large deposit shows a lack of commitment on the buyer's part.

3. A substantial deposit adds credibility to the negotiations.

4. A deposit has no impact on the negotiations regardless of its size.

5. Security deposits are unrelated to the negotiation process.

6. The deposit amount reflects the buyer's financial strength but not their intent.

The correct answer is: A substantial deposit adds credibility to the negotiations.

A substantial deposit does add credibility to negotiations because it signifies the buyer's serious intent and commitment to completing the transaction. When a buyer submits a large deposit, it shows that they are willing to stake a significant amount of money, which can instill confidence in the seller about the buyer’s reliability and dedication to following through with the agreement. This perception of seriousness may influence the overall tone and outcome of the negotiations, potentially making the seller more receptive to the buyer’s terms. In contrast, other options suggest misunderstandings about the role and impact of deposits in negotiations. For instance, a large deposit does not reflect a lack of commitment; instead, it typically indicates the opposite. The idea that a deposit has no impact on negotiations is incorrect, as the size of the deposit can indeed sway the seller's willingness to cooperate. Similarly, security deposits, often associated with rental agreements rather than purchases, are part of a different process and, therefore, relate differently within negotiations. Lastly, while the deposit amount can indicate financial strength, it does correlate with intent, so stating that it does not reflect the buyer's intent misrepresents its significance in the negotiation context.