Should Desert Mountain Memberships be Sold at Market Price?

Should Desert Mountain memberships be sold at market price? The Estancia Golf Club in North Scottsdale recently changed to a market pricing system. Estancia had a large “out list” of members who wanted to surrender their memberships. The Club wanted to clear the list and decided to use market pricing as the way to do it. A large out list can be very toxic to a golf club. Members want to terminate their membership but they are forced to continue paying dues while waiting to get out. Unhappy members bring down the morale of the club. A large out list also often leads to a run on the list. When the list is so long that it will take 10 years to get out, members put their name down just in case they want out down the road. The increasing size of the out list is bad for business. Prospective members shy away from clubs with large out lists.

Estancia memberships were selling for up to $250,000 a few years ago and sold less than a handful of memberships per year. When they changed to market pricing, each member who wanted to sell their membership could inform the membership director of the price they wanted to sell at. The membership director would accept prices from members on the first of each month and then whomever had the lowest price would be on top of the list to sell their membership first. The prices started as low as $65,000. Several memberships were sold in the mid $60’s. Last month one of my clients bought a membership for $68,000. He thinks he got the steal of a deal. Prices are starting to rise. This month the lowest price has jumped to $80,000. Overall, this has been an excellent strategy for Estancia. Firstly, they have had a huge increase to their capital reserve fund through membership transfer fees. Each sale brought an additional $30,000 to the club in transfer fees. They have sold over a dozen memberships in just 6 months, compared to 3-5 per year previously. That has been an injection of $360,000 into the club. Secondly, the out list is much smaller and members are much happier. Members know if they really really want out they can just name a low price and be out within a month, rather than waiting a decade. Estancia is currently in extremely strong financial shape as a result of this program.

Would this work in Desert Mountain? I think it is an excellent idea. The developer of Desert Mountain is keeping the price of the membership artificially high. No one really purchases memberships for $325,000 any more. If you want a membership, it is much cheaper to either buy it through a land purchase or directly from a member. The current “market price” at Desert Mountain is about $125,000 for a membership and the developer needs to open their eyes to this reality.

Carmen Brodeur JD
Realtor
Trillium Properties, LLC
9825 E Bell Road, Suite 120, Scottsdale AZ 85260
Cell (602) 791-0536
Carmen@TopScottsdaleHomes.com
www.DesertMountainHomesOnline.com