Colorado Sales License Practice Test

Dual agency in real estate occurs when a broker represents both the buyer and the seller in the same transaction. This arrangement can create potential conflicts of interest, as the broker must navigate the varying interests and needs of both parties involved. It is important for the broker to obtain informed consent from both parties, ensuring they understand the implications of the dual agency relationship.

In this scenario, the broker's role is to facilitate the transaction without favoring one party over the other, which requires a high degree of transparency and ethical responsibility. Clear communication is essential to maintain trust and ensure that both the buyer and seller feel adequately represented in the process.

Other options describe different aspects of real estate practices but do not define dual agency. For instance, a broker representing only the seller pertains to single agency, while exclusive rights to sell refers to specific contractual agreements without implicating dual representation. A fee arrangement pertains to the broker's compensation structure, which is not directly related to the concept of dual agency. This understanding of dual agency is crucial for recognizing the complexities involved in real estate transactions and the responsibilities brokers hold in such situations.