Humber/Ontario Real Estate Course 3 Exam Practice

How should interest on funds in a real estate trust account be handled?

1. Automatically sent to the buyer

2. Transferred only upon request

3. Detailed in the purchase agreement

4. Provided to the brokerage

5. Invested in a short-term bond

6. Kept by the seller

The correct answer is: Detailed in the purchase agreement

The correct approach to handling interest on funds in a real estate trust account is to ensure that it is detailed in the purchase agreement. This means that the specific terms regarding how interest will be managed, whether it will accrue to the buyer, the seller, or the brokerage, are laid out clearly in the contractual documents related to the transaction. By including such terms in the purchase agreement, all parties involved have a clear understanding of expectations, which helps prevent misunderstandings or disputes later on. When interest handling is included in the purchase agreement, it provides legal clarity and ensures that all parties are aware of their rights and obligations concerning the funds held in trust. This foresight is crucial for maintaining transparency and trust in real estate transactions. Other options may fail to provide an adequate framework for addressing this matter. For instance, automatically sending interest to the buyer or transferring it only upon request can lead to confusion. Without explicit terms set forth in the purchase agreement, there could be disagreements about the appropriate recipient of the interest funds, leading to potential legal issues. Likewise, handling interest by way of investing it in a short-term bond or keeping it with the seller may not align with standard practices or legal requirements in real estate transactions. Therefore, detailing the handling of interest in the