A new and improved lockbox solution that is being offered by the National Association of Realtors (NAR) has received "serious" inquiries and 75 contracts from over 100 real estate associations which are looking for alternative lockbox vendors to the dominant provider in the field - Supra/Risco, both owned by GE subsidiary GE Interlogix, say executives for both NAR and its new partner Sentrilock, LLC.

Says Bob Goldberg, executive vice president of marketing and product development for the NAR, "Over the last couple of years, NAR leadership has been besieged with concerns from association executives and individual members seeking lockbox alternatives to the single vendor out there. There aren't a lot of alternatives, and there is such growing dissatisfaction that we were asked to look at what we could do to promote more competition in the industry. We spent considerable time looking at other people getting into the lockbox business."

There are significant barriers to entry in the lockbox industry, says Goldberg. "It is capital intensive," explains Goldberg, "and the market is saturated with other product from a single vendor."

The dominant player, Supra, also owns hundreds of patents related to its lockbox technologies. Dale Stinton, CFO and CIO for the NAR says that researching these patents, talking with patent attorneys and designing a competing system are daunting tasks for any company.

"GE Supra is far more than just a lockbox, and a lot of patents relate to after-market add-ons," Stinton explains, "the pure lockbox technology is only about 45 patents. Our whole approach was to provide a simple, safe and secure solution. The whole patent issue has been thoroughly investigated, but it is much deeper than that. It's how patent claims work and that is a major expense for any company to do due diligence. It isn't unusual to talk to patent counsel, and find an inordinate number of patents. You will find a suite of patents when you have one vendor that has the kind of portfolio that GE has. So, it was important for NAR to do a heavy level of due diligence. We don't enter into this easily because of issues of competition and monopoly, so we are careful about it. We are comfortable that we don't want to infringe on their patents (GE) and we didn't want to suggest that we are here to say someone else's product isn't good. All we want to do is fill the gap for people who want alternatives."

Among the complaints that the NAR says it received was that there wasn't enough competition to the dominant player, who was in the position to dictate where products needed to go, and associations were asked to implement new technologies that some people didn't want. "The reality is that the marketplace didn't want to accept that," says Goldberg, "when you don't have alternatives, you don't know if you are making the best decision for your members."

Goldberg says he and the NAR were particularly hit hard at Association Executives Institute meetings where AEs demanded to know what the NAR was going to do about Supra's new pricing, contracts, and technology solutions that many felt were being forced on them, according to past reports.

"How we started was major scans to encourage more players in the marketplace," recalls Goldberg. "There were those barriers to entry - patents, market dominance to consider - and a lot of companies we talked to weren't interested to get into the industry. Sentrilock is not a big corporation, but it was small and fast-moving, and they needed a boost in economic investment. You don't want to sell one or two boards, you've got to make sure there is halo that says we are a real player."

Clarifies Stinton, "It wasn't our idea to go into the lockbox business to replace or compete with any vendor, but to simply introduce more choice into the field, as there are certainly boards and individual members who are happy with the lockbox solution they currently have. To illustrate how rare it is for the NAR to get involved with something like this, there has to be a real outcry from the membership - that there is something difficult and unfair out there they say they can't handle themselves. There must be all kinds of products to get NAR to be an advocate, but I can count on one hand the times that NAR has actually become the solution provider (REForms, Realtor.com.) If we do get enough of a grass roots outcry to go beyond an alliance to get into product level solutions, then that is a very rare event."

Stinton says he credits current NAR president Cathy Whatley with encouraging the development of a new lockbox product. "Without her leadership, we would not have gotten this far," says Stinton.

In Sentrilock, the NAR found what it felt was the right company and bought a majority ownership with monies obtained from sale of another NAR investment - Homestore stock.

Sentrilock had the technology background, association contacts and previous service to Realtors via its MLS access software to leverage as advantages in designing a lockbox system that would provide a middle-ground, yet high-tech, alternative to Supra, for boards which don't want products or services that members don't want or don't want to pay for. So far, says Stinton, the capital investment is under $2 million.

"We didn't want a product that was overengineered," says Goldberg. "One concern was some utilities are far more functional than members say they need so they are paying for things they don't use. We wanted something simple but advanced to use with the core functionality of what people wanted. We got a lot of market input from the Realtor community."

Simultaneously working toward a solution was Mark Lesswing, Center For Realtor Technology, which spent the last 18 months analyzing products in the lockbox space in terms of what is being done for access to homes, says Stinton.

"So that was parallel to being introduced to Sentrilock and what was being designed in Cincinnati," he says. "We saw the product a year ago and decided that is exactly what we were looking for. Once we saw it, we turned our attention to operationalizing it."

Scott Fisher, president of Sentrilock, explains how Sentrilock got the nod.

"We have been servicing real estate for over 10 years with PC applications (PC Access software)," says Fisher, "so our perspective is that we have a deep understanding of associations and agents. It was an outgrowth of that where the whole lockbox idea got started. Gene Snavely, with the Cincinnati Association, asked us about the idea. He knew of affiliated manufacturers on the hardware side, so it was that combination that he saw as a solution. He told us 'I have a single choice and I would like an alternative - what can you do for me?'. We have an affiliated company that does mechanical engineering and we have the in-house ability to design and engineer products, so he thought we would be a candidate and we knew about the lockbox situation, so we started looking at the market situation. We thought there was an opportunity to bring in a product with proper Realtor input. It is interesting because our approach is what president-elect Walt McDonald said was needed. We wanted to meet those concerns and needs."

Fisher explains, "Ours is a middle-ground solution that meets critical needs and functionality - security, simplicity of operation, easy administration from the association to administer access, and speed of entry. Realtors want to get in, get the key and do their job. From the features, we can provide an audit trail of who has been in the home, control access times through a simple local device."

Says Stinton, "The tech platform is that it is using smart-card technology. Smart cards are about the size of a credit card that slide into the box. It is hardly state of the art, but it has potential for many years into the future. It's simple and safe, and the high-end cards use infrared and wi-fi (wireless) technologies. In the U.S.A., smart cards are fairly new but they have been used in Europe for a long time. The use of a magnetic strip is limited - the smart card embeds a chip that holds greater information and it can't be copied, nor are they affected by magnetic fields, so it is stored very securely.

"It's a great opportunity to use the cards to brand the associations," notes Goldberg.

Sentrilock's product - the Senturian - will roll out in the spring of 2004, but the product is far from "vaporware," insists Goldberg.

"We introduced Senturian at the Leadership summit last week where 1200 AEs and members attended," says Goldberg, "and there was applause throughout. People were ecstatic."

Adds Stinton, "We saw some attempts to suggest that it was vaporware, but we had four working models of the box. These aren't prototypes - this is the product that will be on the street. We have both a production and assembly facility and we are moving to production and piloting with a couple of associations."

The only challenge remaining is production - how many associations will order the product - how many units will be needed?

Says Fisher, "There are working boxes with smart cards, and we are getting together with associations and getting production scheduled around those needs. We knew this would be of tremendous interest."

"At the summit," says Stinton, "we collected over 100 boards who were serious customers who wanted to talk about lockbox contracts, and since then we have received over 75 contacts."

NAR has also made Sentrilock a REALTOR VIP partner, and plans to assist the promotion of the lockbox solution at the NAR convention and trade show, where Sentrilock will have its own booth and a perch in the NAR booth.

Meanwhile, Supra has also been listening to customers, says CEO Greg Burge, who says he welcomes competition.

"I think it is great," says Burge, "and I don't say that tongue-in-cheek. Choice and alternatives are positive for the marketplace. It allows each vendor to differentiate themselves."

See a complete interview with Greg Burge about Supra's plans to offer more choice to its subscribers in the next edition of Agent News.