Final answer:
A licensee must disclose which party they are representing and any consideration they will receive in a real estate transaction early in the process, for transparency and fair dealings.
Step-by-step explanation:
In real estate transactions, a licensee must make a written disclosure to both the buyer and the seller, indicating the party or parties for whom the licensee's firm is acting as an agent and from whom they will receive any valuable consideration. This disclosure should be made early in the transaction process, ideally at the first substantive contact with the buyer or seller. The purpose is to ensure transparency in the transaction and to protect the interests of all parties by revealing potential conflicts of interest or biases.
Similar to how governments require disclosure of lobbying efforts to promote transparency and ethical lawmaking, and how the adversarial judicial system mandates the sharing of evidence between both sides, disclosure in real estate is aimed at addressing the problem of imperfect information and asymmetric information that exists in many economic transactions. By making such information known, all parties can operate on a more level playing field, fostering fair and just dealings.