Humber/Ontario Real Estate Course 3 Exam Practice

What happens to excess funds in a real estate trust account after a transaction has closed?

1. Would typically be paid to the seller.

2. Would typically be paid to the buyer.

3. Must be left in the account for a period of six months following closing, prior to disbursement.

4. Would be retained by the brokerage for services rendered.

5. Should be distributed equally among the closing parties.

6. Should be held until the next fiscal year for auditing purposes.

The correct answer is: Would typically be paid to the seller.

In real estate transactions, excess funds in a trust account are typically directed to the seller after the transaction has closed. This is grounded in the principle that any funds left over from that transaction often belong to the seller, as they represent money that was not needed for the expenses or obligations tied to the sale. These funds are generally viewed as surplus or unutilized from the transaction's financial settlement, hence they revert to the seller. The practice of returning excess funds to the seller is common in real estate transactions, ensuring that the funds are dispensed appropriately and in accordance with contractual agreements established during the sale. This reflects the principle of fiduciary duty, where the brokerage must handle clients' funds responsibly and in alignment with the agreed-upon terms. The other options might suggest alternative distributions or holding periods, none of which align with standard real estate practices for trust account funds post-closing. Such procedures could complicate or delay the rightful return of funds to the seller, which could be contrary to ethical and regulatory expectations in real estate transactions.