Humber/Ontario Real Estate Course 2 Exam Practice

A buyer gives a deposit to a co-operating brokerage, but the listing brokerage becomes insolvent before closing. What can the buyer do?

1. The buyer can make a claim under the errors and omissions coverage

2. The buyer loses the deposit as RECO does not provide coverage for fund misappropriation

3. The buyer can make a claim under the consumer deposit component of the RECO Insurance Program

4. The buyer can make a claim under the RECO program with a $2,500 deductible

The correct answer is: The buyer can make a claim under the errors and omissions coverage

In this scenario, the correct answer is A. The buyer can make a claim under the errors and omissions coverage. Errors and omissions coverage is in place to protect buyers and sellers in situations where funds are misappropriated, allowing the buyer to recover their deposit if the listing brokerage becomes insolvent before closing. Option B is incorrect because RECO does not provide coverage for fund misappropriation, which means the buyer would not automatically lose their deposit. Option C is also incorrect because the buyer cannot make a claim under the consumer deposit component of the RECO Insurance Program in this situation. Option D is incorrect because the RECO program does not typically have a $2,500 deductible for claims related to the scenario described in the question.