Should You Trust Your Agent?

By — on / Business Negotiations

Adapted from “Why You Should Question Your Agent’s ‘Objective’ Advice,” first published in the Negotiation newsletter.

You’ve found a beautiful condo that you’d like to call your own. You conduct a thorough assess¬ment of its value and identify several other appealing properties in the same neighborhood and price range. Believing you’ve found the magic bid, you phone your real-estate agent.

“Hmm…,” he says. “Sounds low. I’d bump it up by $10,000, just to be safe.”

This sounds high to you, but he’s the expert. Should you follow his advice?

Perhaps not. Whenever you negotiate through an agent, Deepak Malhotra and Max H. Bazerman note in their book, Negotiation Genius: How to Overcome Obstacles and Achieve Brilliant Results at the Bargaining Table and Beyond (Bantam, 2007), the possibility of a conflict of interest—a clash between what’s best for you and what’s best for your representative—emerges.

It’s not that most agents are intentionally corrupt. Your realtor may truly believe that your happiness is his No. 1 priority. But if he will gain the most financially from a quick deal at a high price (and he probably will), he may find himself thinking of times when clients missed out on their dream homes by bidding too low—never mind that you have a few other dream condos in mind.

Federal and state governments typically try to minimize such problems by requiring full disclosure of conflicts of in¬terest, write Malhotra and Bazerman. Yet a 2005 laboratory study by researchers Daylian Cain, George Loewenstein, and Don Moore suggests that disclosure statements not only fail to reduce conflicts of interest but may actually exacerbate them. As it turns out, disclosure doesn’t appear to motivate us to examine our agents’ advice more carefully. Furthermore, disclosure gives advisers “strategic reason and moral license” to exaggerate their advice further, according to Cain and his colleagues.

How can you prevent conflicts of interest from tainting your outcomes? Press your agent to back up advice with objective criteria—and check her advice against feedback from experts who don’t have a stake in your outcome. Finally, if your agent seems to be claiming more value than she creates, consider whether you can get a better deal on your own.

Discover step-by-step techniques for avoiding common business negotiation pitfalls when you download a copy of the FREE special report, Business Negotiation Strategies: How to Negotiate Better Business Deals, from the Program on Negotiation at Harvard Law School.

Related Article: Why You Should Question Your Agent’s Objective Advice in Business Negotiations

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