The following 15 leading boards are engaged in the initiative to create the Indiana Regional MLS. They are the Founders representing about 5,000 REALTORS with the intention of creating a new streamlined regional MLS in September 2012. The business plan and governing documents will be available in June. 1. Bedford Board of REALTORS FBS flexmls (current MLS system) 2. Bloomington Board Innovia 3. Crossroads Association - Paragon 4. Elkhart County Board - Paragon 5. Greater South Bend-Mishawaka Association - MLXchange 6. Jackson County Board - Paragon 7. Kosciusko Board - Paragon 8. Lafayette Regional Association - Paragon 9. Mid-Eastern Indiana Board - Paragon 10. Muscatatuck Board uses Crossroads MLS 11. North Central Indiana Association - Innovia 12. Northeastern Indiana Association - Paragon 13. Realtors Association of Central Indiana (RACI) - Innovia 14. Upstate Alliance (Fort Wayne) Paragon 15. White County Association - SEI The Indiana Regional MLS embodies the future of MLS organizations, representing a more cost-effective new service, which is bigger and better than any of the current individual systems. The Indiana Regional MLS is a platform that makes it easier and less expensive for members to conduct business and make money. Access to the Indiana Regional MLS will be available to all REALTORS through its Founder boards. The new company (LLC) will be formed in September 2012 and will launch its operations in the first quarter of 2013 with at least 3 participating boards. As each Founder board switches over to the new regional system and replaces the prior MLS contract, that association will realize the cost savings associated with bulk technology purchase agreements, most significantly with the Paragon MLS system provided by LPS, a national MLS vendor used by many MLSs in Indiana and 215 others across the county. 1
In a nutshell, here is the new Indiana Regional MLS: One MLS and a single MLS system for all REALTORS, brokers, agents and appraisers who choose to participate with a Founder board All listings entered, maintained and searchable in one system Common MLS and IDX Rules, policies and enforcement Common listing input sheets, forms and associated documents One-stop shopping for data feeds of all listings for IDX and broker back-office Pay one MLS fee for access Principle Broker chooses which board We have been working on the Business Plan and Operating Agreements for a few months with input and guidance from a Workgroup of your peers, consisting of 3 representatives from each of the 15 Founders. The team includes advisor Kevin McQueen, President of Focus Forward (who serves as Facilitator for the group) and the attorney for the process, Brian Larson who is creating the custom-made governing documents. Once the new BOD is seated in September, the Indiana Regional MLS is scheduled to launch in the first quarter of 2013, as a cooperatively owned MLS, which will provide complete MLS services to Founder boards and their members. The Business Plan will be available in June. Here s how it will work: - The Indiana Regional MLS will contract with technology and other vendors and because of its size will charge each board a per user wholesale fee - In turn, each local board will determine its own MLS fee and manage billing and collections of MLS fees from its members. Principle Brokers and owners will decide where to obtain MLS services for their firm and agents through an association of their choice, and make their choice based on location, pricing, and service options offered by the boards. Dozens of other regional MLSs operate in this manner. - Associations are not expected to receive dividends or distributions under this approach since each one sets its own MLS fee for access to the regional MLS. The Board of Directors of the Indiana Regional MLS will revisit the fee structure and wholesale model 18 months after the new company is formed and many have converted to the new system. There may be opportunities at that time to further reduce the expenses associated with billing and collections of MLS fees through centralized billing, managed by the regional MLS. More information and details will be known about the actual costs of running the regional MLS at that time. 2
The Indiana Regional MLS will be governed by its Board of Directors, consisting of one director appointed by each Founder. The Upstate Alliance (Ft. Wayne) will have two directors. There will be a total of 16 directors of the Indiana Regional MLS, a manageable group size. An outside director may be added to provide technology experience and cause an odd number of voting directors. The MLS Advisory Board will provide MLS users with a voice. They will make recommendations to the BOD for improvements to the system, policies, and endorse the direction. Approximately 12 representatives will be appointed by the BOD, representing various geographic areas and bringing a good understanding of local business practices. The benefits of the recommended approach to the Indiana Regional MLS are many: - Lower prices through bulk purchasing of vender and technology services, due to an increased size of a single, common entity - Autonomy of the local board in collection of fees and administration of policies - Single data entry and access to all data, which is especially meaningful in overlapping market areas and for multi-office firms - Choices in board membership based on quality of service and pricing Members are concerned about rising prices, duplication of services, and inefficiency. It is the intent of the Indiana Regional MLS to address these issues while at the same time providing better member services at lower cost. 3
Questions and Answers Question: This all looks very complicated. Who is going to staff this program, and how much will it cost? Answer: It s not that complicated, because the broker and agent billing will be handled by the participating organizations, much as they do now. We think that oversight of the regional can be handled by some current employees in the manner we describe here: General Manager the GM is a non-voting Executive who will oversee the start-up activities and day-to-day operations of the regional. The GM is one of the current association executives, appointed by the BOD for a one-year position beginning in August or September 2012. A Project Manager will be assigned to work closely with the GM and each Founder as they prepare for the transition to regional MLS system. Kevin McQueen will also play a key role in the start-up and conversion management, overseeing the unification of MLS rules and enforcement procedures and by standardizing the listing input sheets. The financial savings will begin for each Founder board when it shuts off its previous system and switches over to the Indiana Regional MLS. Other than the GM and the Project Manager, there are no current plans for further staffing since each local board will continue to manage new member apps and transfers, and provide the front-face of the regional. This will help to ease the transition, since members will continue to talk to the same people they are familiar with now. The difference is with the vendor of the MLS system. Each Founder will in effect be contracting with the regional instead of going directly to the MLS vendor; and the Founders are the owners of this new entity. The GM and Project Manager will be contractors and remain employees of their current associations during the first year or two of operations to keep the costs and overhead as low as possible and keep things moving forward without introducing brand new people to the culture. However, the GM and BOD may determine that additional contract resources are needed at times. 4
Question: What specific services are you proposing? Regional MLS system, Paragon from LPS, same software used now by nine Founders, but with a new look and feel to support broader and future needs Support for mobile phones, ipads and other tablets Associated Documents - disclosure forms and other attachments for easy access IDX smart-framing & RETS for office and agent websites Consumer facing listing website sponsored by REALTORS with direct leads to the listing agent or broker Listing Syndication under broker control Virtual Tours Data Share with other regional MLSs possible Online training, i.e. webinars and videos Local telephone support and training if offered by local board Logon Security by Clareity to manage access for only paying subscribers Paragon 800 number support for end-users In the second phase of the Indiana Regional MLS, integrated public records, auto-populate new listings and forms (MLS Connect from ZipForm), electronic pre-foreclosures, REO and foreclosures (where available) are anticipated. Reciprocal lockboxes and keys are a shortterm goal and we envision one unified platform in the long-term. Lockboxes and keys will remain a service of the local associations (not the regional MLS) for the foreseeable future. Question: So the Indiana Regional MLS will charge a monthly fee to participating associations, based on the number of users from the association. What s included? Answer: the monthly fee charged to the boards by the regional MLS will be based on the following budget line items: Bulk purchase of LPS s Paragon MLS system Mobile, IDX smart-framing and RETS 13 individual MLS system and data conversions (6 from other vendors) Secured MLS logon by Clareity Paragon end-user support for subscribers provided by LPS General Manager (GM) and Project Manager for MLS conversions Cost of running the business - professional fees and meetings 5
The projected cost and additional details will be included in the Business Plan in June. Question: Is forming this new company an ambitious undertaking? What are the projected start up costs? Answer: There will be one-time costs from September to December 2012: One-time legal filing fees to create LLC est. $200 per Founder in September GM and Project Manager to make it happen and keep things moving forward Professional advisors legal, financial, MLS advisor Overhead for meeting expenses, additional contractors at times if needed for the transition period, etc. The Business Plan will outline the required seed money for start-up cash flow to pay bills. Question: What are the anticipated expense reductions for my board? Answer: We think the expense reductions will be significant for some, once we have completed the start-up phase at the end of 2012 and they switch over to the new regional system: Lower operating expenses compared to current stand-alone MLS contracts (4) AREX boards eliminate additional monthly cost of $3.25+ per member Costs related to MLS Committee, including vendor management Boards will continue to make other business decisions to reduce expenses and strengthen the local board s financial position over time. Boards will continue to set local MLS fees based on the bulk purchasing power and wholesale costs offered by the regional MLS. Keep in mind that in addition to the anticipated cost reduction, there will be improvements and increases in products and services for most MLSs. Once our business plan is complete, a financial worksheet will be available to each Founder to determine the specific savings and service upgrades for each participating organization. Question: When does my board switchover to the new system? Answer: The 13 transitions will be staggered, and based on the business criteria below: GM and MLS Project Manager boards will be early adaptors 6
2013 Q1: expect to convert 3-4 existing LPS Paragon customers and leverage their knowledge of the system and long-standing relationships with LPS; to build the BEST possible new system for everyone. This approach will result in early momentum and success stories. 2013 Q2: Current MLS contracts that expire soonest: Bloomington & South Bend 2013 Q3 and ongoing: the rest as soon as possible to realize the cost-savings Question: What s the anticipated time frame? Is it time to present this to our local MLS and association BOD? Answer: Share this overview with your leadership right now and prepare to discuss the remaining documents at your next scheduled meeting. As details become available, your leadership and members can become more and more informed. The Business Plan and Operating Agreement will be available in June. Some boards will hold a joint meeting of the MLS and association for this special opportunity. All Founders will be encouraged to share their support and concerns with Kevin McQueen immediately so the governing documents can be improved and finalized. A roll-call vote will be taken in August to determine which boards will be the Founders of the new company. Some boards anticipate voting before August and they will likely be the first to seat their director. Question: What happens to our current MLS Committee and MLS assets? Answer: We expect that each local MLS operation will sunset shortly after each board switches over to the new regional MLS system. To determine what is best for your board, its MLS corporation and BOD (if applicable), we recommend sharing the forthcoming Business Plan and Operating Agreement with your legal and financial advisors as soon as these documents become available. What other questions do you have at this time? Please submit your questions right away to indiana@kevinmcqueen.com or call (248) 374-1045. Our goal is to be as transparent as possible. We ll also be posting the documents, our progress and answering your questions at our new informational site, www.indianaregional.org this month in June. Respectfully, Kevin McQueen, President Focus Forward Advisor - Facilitator to the Indiana Regional MLS 7