Humber/Ontario Real Estate Course 4 Exam Practice

Who receives the interest on funds held in a real estate trust account?

1. All interest goes to the beneficial owner, often the buyer

2. Buyer cannot send deposits via EFT

3. Funds cannot be placed in interest-bearing securities

4. Payment terms must be in the purchase agreement

5. Interest must go to the seller

6. Interest is retained by the brokerage

The correct answer is: Payment terms must be in the purchase agreement

In the context of real estate transactions, the correct answer reflects an important principle regarding trust accounts and the management of funds. Generally, the interest generated from funds held in a real estate trust account is often related to the terms set forth in the purchase agreement. This agreement outlines the stipulations regarding how any interest accrued on the deposits will be handled. If a purchase agreement specifies that the interest goes to a particular party, that provision must be followed. It's essential in a transaction to have clear written terms to avoid disputes and clarify expectations about the disposition of any earned interest. This means that the ownership of the interest earned on the trust funds depends significantly on what has been agreed upon in the purchase agreement. Other options do not accurately reflect the practices surrounding the handling of interest in a real estate trust account. For instance, it is possible for deposits to be sent via electronic funds transfer, and there are brokerages that may have policies regarding the management of trust accounts, but these do not address the ownership of the earned interest directly tied to the purchase agreement. Therefore, the emphasis on the agreement as a governing document validates the choice made.