Humber/Ontario Real Estate Course 3 Exam Practice

What happens to the deposit cheque if a seller refuses a buyer's offer?

1. Deposited in the brokerage's trust account on the offer date, and refunded later.

2. Returned to the buyer immediately post-refusal.

3. Kept by the brokerage as a holding fee.

4. Sent to an escrow account until further negotiation.

5. Can only be returned with the agreement of both parties.

6. Must be split between the buyer and seller for administrative costs.

The correct answer is: Kept by the brokerage as a holding fee.

In real estate transactions, when a seller refuses a buyer's offer, the handling of the deposit cheque is significant. The correct approach is that the deposit is typically returned to the buyer unless there are specific agreements or circumstances that dictate otherwise. The deposit cheque is meant to demonstrate the buyer's seriousness about their offer and is generally held in a trust account by the brokerage. If the seller refuses the offer, the norms dictate that the deposit should be returned to the buyer, as the contractual obligations have not been fulfilled due to the refusal. While keeping the deposit as a holding fee may seem reasonable at first glance, this is not standard practice because it does not align with the fundamental principles of earnest money deposits, which are intended to secure an offer and not serve as a fee in case of refusal. The principles of fairness and transparency in real estate transactions compel brokers to return the deposit if the offer is not accepted, thus maintaining goodwill and allowing the buyer to pursue other opportunities.