Somewhere in the maze of cubes within the Netflix, a Dilbert-esque manager thought it would be a great idea to raise prices. And, the best part of his plan: Netflix wouldn’t have to provide their customers anything extra for it. It would be just like free money! Unfortunately, this strategy didn’t include a rational for the rise in prices. As a result, management decided not to tell anyone about the price change in hopes their customers wouldn’t notice. Within two weeks, Netflix lost nearly 1 million subscribers. Since, they have spent millions of dollars in public relations in an effort to backtrack from their ill-conceived plan.
Apparently the Board members at the Georgia Association of Realtors (GAR) aren’t Netflix subscribers. For as long as anyone can remember, GAR has been providing licensed real estate salespersons legal contracts and forms to use in their businesses for free. Rumor has it, as of 1/1/2012 those same forms that were freely give out will now cost every real estate sales agent not affiliated with a local realty Board $199.00 a year. Same old forms, now with a new price. From the GAR perspective, it kinda sounds like free money? I also want to point out that as of today this change is still a rumor because in the Netflix tradition GAR has yet to officially announce anything. Why rush, its only late October, not like January 1st is 2 months away or anything.
Why the sudden change? We can only guess. We are talking about legal contracts. And, as everyone on planet Earth knows if you attached the word “legal” to anything, it implies lawyers were involved and that means the outlay of Wall Street-type money. Yes, it did cost GAR a princely sum to create all their contracts and forms. But, these costs were paid over the years by Realtors in the form of the dues. Realtors pay over $450.00 a year to be members of their local realty Boards. A portion of that money is then paid to GAR.
The problem with the Realtor/Board/GAR arrangement is that over the last few years licensed real estate agents are leaving Boards in droves. Sales agents are not paying their Board dues. No Board dues mean lost revenue to GAR. This also means that non-Board sales agents are getting to use GAR forms without having to pay dues. Are Board-paying Realtors footing the GAR tab for non-Board-paying sales agents? That doesn’t seem fair.
There is clearly a disconnect that GAR is trying to remedy. Their strategy to fix this situation is to go after the non-Board paying real estate sales agents. Make them pay to use what was once free. And, that is certainly one way to look at this problem. But, is the non-Board paying sales agents really the right target?
Sales agents are not paying their GAR dues because they are not joining or participating in local realty Boards. Randomly ask 100 different sales agents what they think about local realty Boards and the responses you will get run the gamut from outright laughter to expressive language not suited for this article. It’s fairly safe to say not many agents know or can articulate whatever benefits they realize from Board membership. And, I am also not certain the Boards themselves can articulate their own message very well either. One prominent local Atlanta Board still lists “prestige” as being the number one benefit realized from board membership. Seriously—prestige? If you think for one moment there is an ounce of prestige realized from Board membership, stop reading this article.
What if the local realty Boards did provide real value to area agents? Real estate salespeople are very open to almost anything that will give them an edge. And, collectively, agents spend millions of dollars trying to get that edge. So is it really the money agents have a problem with when considering Board membership? Or, is the real problem agents perceive no value in Board membership. If you think you never get a return on an investment, why would you continue to invest?
In an effort to fix their dues/contracts and forms problem, GAR has elected to go after the agent. They could have just as easily gone after the local realty Boards. GAR could have demanded local Boards do their job and create value within their programs. It’s not quite a baseball movie in a cornfield but, if you create value and need—they will come. And, they will pay. Problem solved.
Like the industry itself, GAR is stuck in an antiquated business model. They are dependent on local realty Boards. Realty Boards may have meant something in the past but their value in today’s market is marginal at best.
Sadly, in most cases, real estate sales agents don’t have free choice when it comes to Board membership. Brokers, with perhaps franchise agreements requiring they support and enforce Board participation, impose the yearly fee on its agents. “If you want to work with ABC, you have to join a Board”.
But, in recent years, smaller independent realty brokerages are breaking away from tradition and not associating themselves with local realty Boards. Oddly, if a Broker doesn’t participate in realty Boards, then none of the agents affiliated with that brokerage are even allowed to join a Board. This tells us something about the Board business model if they won’t allow free choice. Name another business model that operates like that?
For a huge percentage of realty professionals, Boards are a failure. And with GAR stepping out from behind them, it perhaps sends a signal that their day has finally come.
Getting Boards out of the picture may actually be GAR’s plan. Agents will continue to comparison shop. Pay Board dues of $450 and get GAR contracts and forms. But, agents will soon be able to pay $199 directly to GAR and get the same contracts and forms. If an agent perceives no realized value from a Board, then the cost savings of over $250 is a no-brainer. Of course this only applies to sales agents whose brokerages are not tied to franchise agreements.
When will franchise brokerages step away from local realty Boards? Probably never. Traditional franchise brokerages hang on to the past like it’s the last chopper out of Nam. They will never let to go of their glory days when their brand actually meant something to the average consumer.
If the GAR strategy is to move away from Boards or simply raise prices we may never know. But we do know this; new contract and form companies will surely emerge. And, you can bet the farm they will be less than half the price of GAR. Even GAR admits this and has said they welcome the competition.
One has to wonder if GAR realizes what they have is a static product. It’s not like agents will want to use the more expensive GAR contracts because they have more pizazz! Consumers could care less which, legally binding valid contract is used.
The Netflix pricing decision has turned previously unaware consumers into anti Netflix advocates. “You’re still using Netflix”? Loyalty is lost within a blink of an eye.
Good luck, GAR!
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