In terms of agency, which of the following statements is true regarding dual representation?

Dual representation occurs when a real estate broker represents both the buyer and the seller in the same transaction. The key aspect of this arrangement is that it requires full disclosure to both parties involved. Full disclosure means that both the buyer and the seller must be made aware of the dual agency relationship and how it may affect the representation they are receiving. This is crucial because both parties need to understand the potential conflicts of interest and the broker's role in negotiating on their behalf.

In many jurisdictions, California included, the law mandates that brokers inform both clients about the implications of dual representation and obtain their consent. This ensures transparency and helps maintain trust during the transaction.

The other statements do not accurately reflect the nature of dual representation. While dual representation can raise ethical concerns and is carefully regulated, it is not always illegal. Notably, it does not inherently favor one party over another; rather, it places the burden on the broker to act impartially and in the best interest of both parties. Lastly, while dual representation might be viewed with caution, it is permitted under specific conditions, as long as the required disclosures are made and consent is obtained.