Humber/Ontario Real Estate Course 3 Exam Practice

Why is a substantial deposit important in real estate negotiations?

1. It adds credibility to the negotiation process

2. It indicates a lack of buyer commitment

3. It must be certified to show good faith

4. It has no impact on negotiations

5. It guarantees the sale will go through

6. It ensures the buyer gets the lowest possible price

The correct answer is: It adds credibility to the negotiation process

A substantial deposit is critical in real estate negotiations because it adds credibility to the negotiation process. When a buyer provides a significant deposit, it signals to the seller that they are serious and committed to purchasing the property. This can enhance the buyer's position during negotiations, as it demonstrates their financial capability and intention to follow through with the transaction. A larger deposit often makes a buyer more appealing to sellers, especially in competitive markets. Sellers may be more inclined to accept an offer from a buyer who shows a willingness to invest a considerable amount of money upfront, as this reduces the risk of the deal falling through. This trust factor can help facilitate smoother negotiations and can potentially result in more favorable terms for the buyer.