A closer look at associations

It was the mid-‘90s when the state of Illinois adopted the “broker’s choice” model for its Realtor associations, a move that radically changed how real estate agents in and around Chicago interacted with their associations.
 
No longer were Realtors obligated to join the association that represented their territory of business. A Realtor in West Town, for instance, was no longer required to join the Chicago Association of Realtors (CAR); a Realtor in River Forest did not have to join the Oak Park Area Association of Realtors (OPAAR); and lastly, no longer did the Realtor working in Naperville have to join the Mainstreet Organization of Realtors (MORe). From then on, agents were free to choose whichever Realtor association they wished to join, and through which association they would attain the two major benefits of membership: access to the MLS, and the official right to use the distinguished “Realtor” title.
 
And those benefits remain popular with Chicago’s real estate professionals. According to the most recent data from the Illinois Department of Financial and Professional Regulation, there were more than 48,000 registered real estate brokers in the Chicagoland area as of October 2012, and the majority of them belong to a Realtor association. Indeed, between CAR, MORe, OPAAR, the North Shore-Barrington Association of Realtors (NSBAR), the Heartland Realtor Organization (HRO), the Three Rivers Association of Realtors and the Realtor Association of the Fox Valley, 68 percent of Chicagoland’s agents are part of a Realtor association (for a more detailed look at those associations, see our sidebar here).
 
But given that members of the seven local Realtor associations enjoy similar benefits, why do agents join one association and not another? With broker’s choice rights in place, how do agents choose
their association?
 
Differing Approaches to a Realtor Necessity
Access to Midwest Real Estate Data (MRED), Chicagoland’s MLS, is an exclusive privilege that association members enjoy, and easily one of the main benefits of joining a Realtor association; after all, though syndication sites such as Trulia and Zillow may continually strive to improve the accuracy of their listings, and online brokerages such as Redfin may feature direct IDX feeds to their sites, they will never quite match both the stats of the MLS and its control over the most accurate real estate listings in and around Chicago.
 
As ubiquitous as the MLS may be, though, all the associations approach their relationship to the MLS differently. As Terry Penza, the president and CEO of NSBAR explains, MRED charges all of Chicagoland’s Realtor associations a base fee for access to its data, which is $18 per agent, per month. So an association with 10 agents, for instance, would be charged $180 for every month of the year to access the MLS. Those agents though, Penza says, pay the association an amount that is greater than that $18 fee to cover the association’s costs of administrating the MLS access.
 
At the end of the day, all of Chicagoland’s associations are providing their members with  the same kind of access to the MLS; however, for an additional fee, some broker/owner members can gain access to MRED’s inner workings and have a voice in the general direction and policy of the MLS.
 
To attain such a status, Realtors have to become preferred unit holders in MRED. There are currently 73 preferred unit holders of MRED, and Rob Schaid, the president of MRED and one of those preferred unit holders, says the process of becoming a unit holder is quite straightforward.
 
I want us as an association to finally say, ‘Hey members, we’re here for you. What do you need? We want to provide what it is that you perceive you need.’ We want them to tell us what can we do better for them this year.”
Tonya Corder, Mainstreet Organization of Realtors
 
Besides being a licensed broker/owner, the individual must be a subscriber to MRED through one of Chicagoland’s participating associations. If those conditions are met, the person can purchase a share of MRED for $1,000. The share is purchased in the name of the person’s firm, and no firm, including its affiliate offices, is allowed to hold, own or acquire more than one preferred unit. Also, Schaid says that shareholders are not allowed to sell their shares once they are purchased.
 
It is among these shareholders that the MLS’ 15-person Board of Managers is assembled. The board, Schaid explains, is composed of four different subsections that reflect the nuances of the shareholders. The first three sections are made up solely of the shareholders, and the sections are organized based on the size of the firms the shareholder represents. So, four individuals are elected from the first group, which is for small brokerages; five individuals are elected from the second group, which is for medium-sized brokerages; and four are elected from the third group, which is for large brokerages; and of course, the specific sections vote on who will represent them in the Board of Managers.
 
The final section, then, is reserved for the Realtor associations. Of the seven associations that work with MRED, Schaid says two CEOs are chosen to represent the associations on the board, and by definition, they are not shareholders; the current CEOs are Penza from NSBAR and Jim Haisler from HRO.
 
Finally, the positions of the president, vice president, treasurer and secretary are chosen from among the board, with the board members again conducting an election to select the new representatives for the positions.
 
MRED does place term limits on its board members, Schaid explains, though there is a bit of a catch to how it operates. Board members serve two-year terms and are able to serve three consecutive terms. Once those three terms have been served, though, the shareholder must take a year off from the board before running again. Though nothing can stop shareholders from running for continuous terms after each one-year break, Schaid says the rule was a step forward for the MLS, considering that, when it first formed in 2008, there were no term limits for board members.
 
Schaid, who is also the broker/owner of RE/MAX Plaza in McHenry and a past president of HRO, says the responsibilities of his presidency are not very expansive. Given the breadth of MRED’s staff, Schaid says his main role is running the MLS’ board meetings. Rather, Schaid says the influence of being a preferred unit owner is a collective one, with the unit  holders developing the broader framework under which the MRED staff operates the minutia of daily tasks and decision making.
 
“As long as [the staff] is doing things that are within the direction we’ve set out, then it’s up to them,” Schaid says. “But it’s up to us to set the direction.”
 
One example Schaid cites is the “Midwest Homes” iPhone app that MRED recently developed; the idea, he said, originated from a preferred unit owner who felt the MLS should invest more in mobile technology; after that initial spark, it was the staff that ultimately developed the app and implemented it into MRED’s business model.
 
Schaid admits, though, that such benefits are implicit – there is no direct financial benefit to becoming a preferred unit holder in MRED. Instead, the benefits come from having a much greater involvement in the local real estate markets, along with networking opportunities and, perhaps most notably, the education one attains from working amongst such respected Realtors. The lack of a more explicit financial benefit, Schaid believes, is why so few members of the MLS (again, just 73 of 36,000-plus members) ultimately take the step to becoming shareholders.
 
The Challenge of Justification
As useful as membership to the MLS is for Realtors, it does place a burden of justification on the Realtor associations, says Tonya Corder, the 2012-2013 president of MORe and the managing broker of Keller Williams Preferred Realty in Orland Park. After all, if the MLS is an indispensable component to being an effective real estate professional, and association membership is required to access the MLS, how can associations provide programming and benefits that go beyond that initial incentive?
How can associations become more than mere gateways to the MLS?
 
“That’s our challenge every year,” she says. “What services are we providing to the membership outside of the MLS?”
 
Specific to MORe, Corder points to the association’s new “Custom Built” program, a new initiative in education and communication that just launched on Jan. 7, as the perfect example of that.
 
The Custom Built program, explains MORe CEO Pam Krieter, grew out of the association’s strategic planning session last summer, when it allocated $25,000 of its 2012-2013 budget to “extra communication information” and “extra communication content.”
 
"I have a very good rapport with our members, which is a huge perk to having a smaller association…it’s like a family atmosphere, which you can’t have when you have a huge association.”
Gerri Keating, the Oak Park Area Association of Realtors
 
The reason for the initiative, Krieter says, came from two sources: two years’ worth of word-of-mouth communications, and surveys the association conducted in early 2012. Through both, members reported they were receiving far too much information from the association that was incompatible with their specific real estate business, and the association began considering ways to better focus its communication with its members – and thus, Custom Built was conceived.
 
Here’s how Custom Built works: first, members are divided into three categories based on their experiences and interests. Members in the “Optimize” group, for instance, are newer real estate professionals who are not necessarily pursuing leadership positions, but are nonetheless looking to improve upon their business techniques and become more productive in their brokerage; by contrast, members in the “Lead” group are aspiring leaders or current leaders who are aiming to move forward in the industry; and finally, members of “Enrich” are seasoned, experienced professionals who want to both modernize their business and mentor up-and-coming agents and brokers. Once a member joins one of the categories, Krieter explains, MORe is then able to send them communications that are more in tune with their interests and aspirations.
 
“So this way,” she says, “we’re hoping that our staff will now look at everything we do through the eyes of the member who may want to see that, and then we can define it, structure it and send it to them based on the fact that that’s the kind of information they’re looking for, and hopefully when they receive it, now it is more specific to address their member needs.”
 
In addition to Custom Built, Krieter says there are two additional programs MORe is working on: “Listen 360,” a customer feedback management system that will seek member input on MORe staff performance; and the “Realtor Excellence” program, a partnership between MORe, the National Association of Realtors and Quality Service Certification that will provide members with a platform for their clients to provide feedback. Listen 360 will launch in February, but the association is still discussing Realtor Excellence on an office-by-office basis with managing brokers. Realtor Excellence, Krieter explains, will be free for all participating offices its first year, during which time NAR and MORe will handle the costs of the program (MORe’s share, she says, comes out to 50 cents a member).
 
For members of NSBAR, Penza says the association offers an on-site tech department to assist in all computer-related matters. Members are not only entitled to free phone support, but they can also bring their system to NSBAR’s headquarters in Northbrook for hands-on assistance – though as Penza explains, “hands-on” is an ironic phrase, given the billing structure for the tech department. Members are charged $60 an hour for the department’s services, but only when an employee of the tech staff is physically touching the keyboard; there are numerous programs that the department will run on member computers, Penza says, so while those programs are cycling, and the employee’s hands are not touching the keyboard, no fees will be accrued.
 
CAR, also, has numerous complementary programs and groups to engage the membership, with one of its most notable being its Young Professionals Network (YPN), a member-driven organization that is free for CAR members.
 
As Erin Mandel, the current chairman of CAR YPN and a broker associate with @properties in Chicago, explains it, CAR YPN is based on positivity, on acknowledging the achievements of successful entrepreneurs through various social events, education forums and philanthropic endeavors in a manner that is encouraging and supportive.
 
“It’s essentially a brotherhood of people,” Mandel says, “who are all moving towards the same goal, which is to sell real estate, celebrate each other, celebrate each other’s successes [and] share stories so we can better serve our clients and communicate appropriately with all parties.”
 
And the network has reported a number of successes in recent years. In 2009, the year that Mandel first joined CAR YPN, it was named “Network of the Year” among the national YPN organizations, and in 2011, the Illinois YPN received the same honors. And since Mandel joined, its membership has tripled to its current 379 members.
 
Ginger Downs, the CEO of CAR, said YPN is one part of anticipating the needs of the association’s members.
 
“At CAR, we see our role as staying ahead of our members and anticipating what tools and services they will need to thrive as top-notch Realtors,” Downs says. “Our board of directors is committed to maintaining our standing as a model association by serving members with special events and affinity groups, like the YPN and CommercialForum, that connect like-minded professionals for networking and business building.”
 
Of course, beyond programs specific to MORe, CAR and NSBAR, there are other offerings to Realtors that all the associations offer, such as assistance in arbitration and ethical complaints.
 
The process for MORe members, Corder explains, is quite straightforward – agents fill out the necessary paperwork through MORe’s website; they submit that paperwork to the association’s Professional Standards department; a grievance committee reviews the complaints, and judges whether there is any merit to the case; if they decide there is, the complaint goes to a hearing, and the hearing panel (which features members chosen by peers) listens to both sides of the complaint, very much like any conventional courtroom setting. According to information provided by MORe, in 2012, there were 119 ethics/arbitration requests and 21 mediation requests.
 
Should MORe rule in favor of the plaintiff, Corder says one of two things happen: the other agent either pays a fine of various amounts – NAR permits sanctions of up to $5,000, though each panel decides upon the amount of the sanction – or they take a “penalty” class, one that does not count towards his or her continuing education but, rather, shore’s up his or her understanding of the issue at hand.
 
Again, Corder was speaking to how arbitration and ethical complaints function for MORe members, but both Penza and Gerri Keating, the CEO of OPAAR, say the process is very much the same across Chicagoland’s associations for two main reasons: first, all Realtor associations are obligated to uphold NAR’s Code of Ethics, which form the backbone of the ethical standards that association members are held to; and second, the seven local boards all signed a “Multi-board Professional Standards Agreement” in 2002, which, for the sake of continuity in any multi-board complaint, synthesized the process across the boards and established new protocols for hearings; for instance, should a multi-board complaint reach a hearing, Penza says the panel will be composed of members from different associations.
 
Small is Beautiful
 
Though there is unity in the arbitration/ethical arena, there are, as with MLS membership, nuances that differentiate the associations’ respective approaches to the matter, and in the case of OPAAR, Keating says the association is distinguished by its relative smallness – a quality that, in her mind, is OPAAR’s biggest advantage to its members.
 
Keating has been in her position for more than 18 years, and was the recipient of Chicago Agent’s 2012 Agents’ Choice award for Association VIP. Wryly referring to her “two-and-a-half” person staff for OPAAR, which includes herself, her assistant and one part-time employee, Keating says the association conducts its business through the prism of a smaller, community-themed association, a distinction that grants it numerous benefits over its larger brethren, particularly in her relationship with the membership.
 
“I have a very good rapport with our members, which is a huge perk to having a smaller association, because you know all of them,” Keating explains. “When somebody walks in, I know their mother-in-law had hip surgery, or that they have a brand new grandson. And for some people, that’s extremely important – it’s like a family atmosphere, which you can’t have when you have a huge association. It’s not possible.”
 
The theme of “family” is one that Keating references often, particularly when OPAAR members visit the association’s headquarters in Oak Park. Family even plays a role in the association’s aforementioned approach to arbitration and complaints; because the association is small, Keating says, and because 96 percent of its members are based in either Oak Park, River Forest or Forest Park, chances are the brokers know one another well, and are able to settle any disputes without involving the association. Though they do still encounter multi-board disputes, Keating says she’s seen only four inner-board disputes arise in all of 2012.
 
The “small is beautiful,” kindred philosophy that Keating preaches also influences the way she manages the association and its members. She conducts business in a direct, efficient way by personally contacting members and reminding them of licensing requirements, continuing education courses and any other industry necessities that require their immediate attention. That way, Keating says she can ensure that her members are up-to-date on all their needs, and she does point to some notable stats supporting the success of her approach. The transition licensing requirements for Illinois real estate professionals, which took effect April 30, resulted in a 22.3 percent decrease in overall licensees for Illinois, according to the Illinois Department of Financial and Professional Regulation; yet for OPAAR, an association with 450 members, only two members failed to make the transition, and one of those was because the member failed to mail the necessary paperwork after he had completed it.
 
Also, Keating says because she exerts such direct control over the finances and programing of the association, OPAAR’s president, who is elected to one two-year term (rather than the one-year terms served by most other association presidents), serves in more of a “figurehead” capacity, as she described it, a public face for the association in its relationship with the real estate community and homebuying public. So while Keating, for instance, is scrutinizing budget details and contacting members for continuing education requirements, the association’s president, who is currently Andy Gagliardo, the managing broker of Gagliardo Realty Associates in River Forest, will take part in interviews with the press and other more public activities.
 
That approach to the CEO/president relationship is different from how MORe operates, where the relationship between Corder and Krieter works in a more fluid manner. Though on the whole, Corder concerns herself more with the membership and Krieter with raw financial matters of the association, she says those responsibilities are not mutually exclusive, so while she partakes in MORe’s budgeting process in August and September, Krieter is quite engaged with the services offered by MORe, particularly in notifying its broad membership of the many programs MORe offers them.
 
To Merge or Not to Merge?
 
Of course, another marked difference between OPAAR and MORe is the size of the associations. At more than 14,400 members, MORe is the fourth-largest association in the U.S., with only the associations in Houston, Miami and Long Island being larger. Though Corder says the association’s geographical sprawl can prove troublesome for planning events (after all, MORe has members as far east as the Indiana border and as far south as the Kankakee area) she nonetheless loves the immense size of the association for one main reason – the opportunities its financials allow. Because MORe’s budget, which is $8.4 million for 2012-2013, is so large, the association is able to develop programs and technological offerings for its members that other, smaller associations (such as OPAAR) would be unable to fund, with Custom Built and Realtor Excellence being only the most recent examples.
 
MORe’s 2011 merger with RANWC contributed to its current size, and the success of the merger – not only is MORe utilizing its size for the aforementioned programs for members, but through consolidation of administrative positions and streamlining of services during the merger, it was able to avoid an increase of member dues for 2012-2013 – the question seems to be if other Realtor associations should consider merging; and coincidentally, such were the discussions that NSBAR engaged in with CAR in early 2012, though as with past discussions between the two associations, it did not result in a merger.
 
Though Penza could not comment specifically on why the merger talks stalled, she said that both sides remain “open to discussing it,” though in her opinion, no merger will be debated unless NSBAR members support it. Too often, she says, firms resort to mergers for purely financial reasons, and the employees and/or members of the merging entities get left out of the discussion.
 
“The key is, what do the majority of the members want?” Penza says.
 
Going forward with MORe, Corder is in an interesting position as president. Though she is serving only the second presidential term in the newly-merged association’s history – Tom Krettler, broker associate with RE/MAX Unlimited Northwest, and Jack Persin, the managing broker of Ryan Hill Realty, served as MORe’s co-presidents for the 2011-2012 term – she is, for all intents and purposes, the association’s first post-merger president, with Krettler and Persin’s tenure being spent working out the “bumps and aches,” as Corder calls it, of the merger. But now that the merger, and all its kinks, has been worked out, Corder is looking forward to establishing a member-driven precedent that all future presidents of MORe will pursue, and building and bettering the association in the process.
 
“Now that we are merged, we need to move forward,” she says. “I want us as an association to finally say, ‘Hey members, we’re here for you. What do you need? We want to provide what it is that you perceive you need.’ We want them to tell us what can we do better for them this year. We want to build our relevancy up with our members, whatever role that is. And maybe it’s not the traditional role that we’ve been in; it may be something different, we don’t know. We’re going to find that out from our members [and ask], ‘What exactly do you need from your association?’”
 
And the way Corder plans to answer that question is through engagement, particularly with MORe’s minority members, who she hopes to inspire to take a greater action with the board; in fact, it’s one of the main initiatives she would like to be remembered for as president.
 
“I want to be able to pull in members that are there that may not even come into the board or have a need for the board, but I want to get them more involved with the board,” Corder says. “I want to reach out to the Hispanics, the Asians, the African-Americans.”
 
“With our Board of Directors,” she continues, “I want to look around and see leadership. We’re looking for leaders, and we’re looking for diversification, not just one group of leaders or anything like that, and we want to make sure that some of those minority members that maybe have not been in a leadership position, but have the skills necessary to get there, that we can develop those skills so they can be future leaders too in the association.” C.A.
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