Before forming a brokerage relationship, what must a licensee disclose?

A licensee must disclose both the type of brokerage relationship and the broker's compensation before forming a brokerage relationship to ensure that all parties understand the terms and agreements involved in the real estate transaction. This requirement is crucial because it establishes transparency and builds trust between the licensee and the clients. By clarifying the nature of the relationship, clients can make informed decisions regarding their representation and the expected services. Additionally, understanding compensation helps clients recognize any potential conflicts of interest and allows them to determine the value of the services they will receive.

The other options do not encompass the complete range of necessary disclosures. Focusing solely on the type of relationship or just the compensation would leave clients without a comprehensive understanding of their agreement with the licensee. Providing both pieces of information is essential for effective communication and upholding ethical standards in real estate practices.