Humber/Ontario Real Estate Course 3 Exam Practice

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What is required to return a buyer's deposit if they fail to arrange financing and want to terminate the agreement?

The buyer and seller sign a notice of termination, which authorizes the brokerage to return the deposit.
The buyer signs a notice of termination for the brokerage to return the deposit.
A mutual release is required in addition to the notice of termination to return the deposit.
The buyer signs a waiver, and then both parties sign a mutual release before the deposit is returned.

The correct answer is: A mutual release is required in addition to the notice of termination to return the deposit.

To return a buyer's deposit when they are unable to secure financing and wish to terminate the agreement, a mutual release along with a notice of termination is necessary. This is because the deposit is typically held in trust by the brokerage, and for them to release it, they require both parties to agree to that release, thus ensuring protection against potential disputes. The notice of termination alone may not suffice because the seller may still have a claim to the deposit unless there is a clear mutual agreement that the buyer is entitled to it back. This mutual release formally documents the consent of both parties regarding the cancellation of the contract and the return of the deposit, thereby safeguarding the brokerage from liability. Alternative options suggest a simpler process — either solely requiring the buyer's sign-off or just a notice of termination — which does not encompass the necessary agreements from both parties to successfully release the deposit without conflict.