1. 2015-2017 Strategic Plan & 2015 New Program Summary Geoff McIntosh C.A.R. Treasurer

2. 2014 STRATEGIC PLANNING AND FINANCE COMMITTEE PROCESS

3. December 2013: Brainstorming Meeting

4. January 2014: Business Meetings

5. March 2014: Offsite Meeting: Environmental Scan

6. Current thinking – Change & the Future Be paranoid – prepare to be tested as an organization. When it comes, change will be profound & discontinuous Don’t be complacent Always better to prepare for change Anticipation is key Our fundamental assumptions may be wrong “No change – No change” A transformative event will take place in real estate – what could that be?

7. What is the current thinking? What is our strategic game plan? Can we represent both capital and labor? Political power is our single greatest asset – can we hold on to it? Industry is vulnerable to change from the outside because of significant over-capacity Need to focus OUTSIDE of the organization Maybe our biggest problem is that we don’t have competition Market power has gone to the individual agent & their loyalty is to their own bottom line

8. Where are our inefficiencies? Technology is not disruptive in and of itself. The disruption comes because it destroys things that are not efficient: Financing is inefficient Finding a Realtor is inefficient The MLS is inefficient What else is inefficient?

10. "Black Swans” Unpredictable or unforeseen event, typically one with extreme consequences The disproportionate role of high-profile, hard-to- predict, and rare events that are beyond the realm of normal expectations The psychological biases that make people individually and collectively blind to uncertainty and unaware of the massive role of the rare event in historical affairs.psychological

11. Black Swan Examples: Internet Dissolution of the Soviet Union Challenger Disaster 9-11 What else?

12. “Disruptive Innovation” An innovation that helps create a new market and value network, and eventually disrupts an existing market and value network, displacing an earlier technology. In other words, fast & significant change over a short period of time Examples?

13. A CAUTIONARY TALE

14. Case Study: Blackberry 2010: 43% U.S. market penetration 2014: 3% U.S. market penetration What happened? Firm caught off-guard by the hyper-rapid pace of innovation in the mobile space Assumed it had a captive (gov’t) audience iPhone released2007; Android smartphones in 2008 Consumers wanted: faster browser; better touch screen; diverse applications RIM wanted to keep costs low and battery life long

15. Case Study: Blackberry Director’s have a “Duty of Foresight” Real world consequences of misreading the shifting strategic environment Very important to: Question business models that are not adaptive & resilient Recognize threats posed by rival systems Consider how “upstarts” might disrupt things Have meaningful value conversations with stakeholders Listen to your customers

16. Case Study: Travel Agents

17. BRAVE NEW WORLD

18. Case Study: Shared economy: airbnb Give your home to a total stranger, often from another country, without an intermediary – WHAT??? Would it have been out-lawed if the hotel industry had seen this coming? Would Uber have been out-lawed if the taxi industry had seen it coming?

19. Pros and Cons

20. ENVIRONMENTAL SCAN: RAINBOW SWANS

21. End of Independent Contractor Status

22. Proliferation of Off-MLS Listings

23. Rise of Teams

24. Waning Federal Support for Housing Fannie & Freddie; FHA; MID;

25. Zillow/Trulia Owns the Consumer

26. Feeling like a squirrel?

28. OUR BIGGEST ENEMY…

29. “The C.A.R. Bubble” Who is our competition?

30. “ Strategy today and in the future must be a continuous, real-time process of learning rather than a calendar-driven exercise in planning that occurs on “association time”* Always lead with knowledge Fact-based decision making NOT opinion-based decision making *Jeff De Cagna Aug 2014 “Blackberry Breakdown: How a Smartphone Giant Lost It’s Way”

31. 2005 31 1st - It is ridiculed. 2 nd - It is violently opposed. 3 rd - It is accepted as self-evident. All truth passes through three stages Arthur Schopenhauer

32. May 2014: Business Meetings

33. 2014 C.A.R. Strategic Planning Books

34. August 2014: Offsite Meeting: Budget Review

35. MEMBERSHIP FORECAST

36. Membership Forecast (Thousands) 201120122013 Renewals141.9140.3141.7 YTY % Change -4.7%-1.1%1.0% New19.019.926.7 YTY % Change-10.4%4.7%34% Paid non- members 0.7 YTY % Changen/a Total160.9160.2168.4 -5.4%-0.4%5.1%

37. New 2015 Programs Approved by SPF Committee:

38. zipForm Mobile This augmentation provides zipForm® Mobile as a member benefit. zipForm® Mobile Web Edition has changed the real estate transaction experience for REALTORS®, buyers, and sellers across the state with innovative technology, that has streamlining the transaction process and elevating customer service. It is available for most smartphone and tablet devices as long as there is an active internet connection. Revenue: $0 Total Expenses: ($405,800) Total Net Costs: ($405,800)

39. Incremental Media Purchase Funding to incrementally increase the impact of consumer advertising via an expansion of the media buy, primarily in the Mobile Ad and Network TV spending. Revenue: $0 Total Expenses: ($300,000) Total Net Costs: ($300,000)

40. REALTOR® Advertising – New Commercials This program will create three new TV spots to begin airing in 2015. Additionally, it will produce a slate of new radio commercials, as well as new digital ads, also for 2015. Revenue: $0 Total Expenses: ($220,000) Total Net Costs: ($220,000)

41. Data Warehouse This program brings C.A.R. into the world of “Big Data” by creating an infrastructure to efficiently store and access already existing data on member preferences. The result will be a higher level of customer engagement and satisfaction with the Association. This initiative will utilize internal systems, data, tools, infrastructure, applications, and best practices to build an infrastructure allowing the association to incorporate key metrics and supplemental/lifestyle data. Revenue: $0 Total Expenses: ($84,800) Total Net Costs: ($84,800)

42. Strategic Thought Conference Based on the success of the 2014 conference, held on July 21 in San Jose, it is recommended that a Strategic Thought Conference be held in Southern California in 2015. The conference is conducted to assist the Association Leadership and Association Executives to prepare for the future and to address the challenges that will confront the association. Revenue: $0 Total Expenses: ($34,900) Total Net Costs: ($34,900)

43. Update Find a REALTOR® and Member Profiles Significantly enhances the Find A REALTOR® search engine on car.org which is designed to connect consumers with active REALTOR® members and assists real estate agents to establish referral networks. Both are important services this search tool offers our members to help grow their business. Revenue: $0 Total Expenses: ($24,200) Total Net Costs: ($24,200)

44. NAR Organizational Alignment-Core Standards Local and State associations of REALTORS®, as a condition of membership in the National Association of REALTORS®, must meet NAR’s Organizational Alignment Core Standards, a set of requirements that fall into six categories: Code of Ethics; Advocacy; Consumer Outreach; Unification Efforts and Support of the REALTOR® Organization ;Technology and Financial Solvency. This program provides the resources to assist the local AOR’s in meeting these new requirements. REALTOR® associations must certify compliance with the standards by June 30, 2015—and by June 30 of each subsequent year—or be subject to revocation of their charter. Revenue: $100,000 Total Expenses: ($113,400) Total Net Costs: ($13,400)

45. zipForm® One-on-One Support This program continues the One-on-one zipLogix Digital Ink® Support Line created in 2014– a personal training session conducted over the phone with a digital signature expert. If it is after hours or we are experiencing high call volume, the member may choose to schedule a future appointment online. The call is $24.95 for a maximum of 30 minutes. A follow up email is sent with self-help resources and a survey. Revenue: $64,900 Total Expenses: ($74,400) Total Net Costs: ($9,500)

46. zipForm® Misuse This program addresses one of the most significant types of misuse of zipForm® by identifying non-authorized users and resolving violations through cost effective analytics. The initiative will also provide for an opportunity to educate terms of use, explore technological changes to prevent account sharing, and initiate legal action in the form of cease and desist letters when needed. Includes potential revenues based on settlement fees. Revenue: $10,000 Total Expenses: ($10,800) Total Net Costs: ($800)

47. California Connection-Bridging the Gap Considering the political and economic implications of California’s changing demographics, this program will be contingent on NAR’s Housing Opportunity Grant award and provides for a Summit that will bring together Local AOR leadership and staff with AREAA and NAHREP chapter leaders to bring awareness to the political and demographic landscape relating to C.A.R. housing issues. Inviting California chapter leaders of NAHREP and AREAA to meet with local association leaders and representatives, creates an opportunity to align the organizations politically, and better represent the REALTOR® to share a political advocacy viewpoint focused on electoral campaigning, issues based campaigning, and PAC investment (RAF). Revenue: $5,000 Total Expenses: ($5,000) Total Net Costs: ($0)

48. Summary of New 2015 Programs Revenue ($)Total Expenses ($)Net Cost ($) 1) zipForm®-Mobile Augmentation$0$405,800($405,800) 2) REALTOR® Advertising –Incremental Media Purchase$0$300,000($300,000) 3) REALTOR® Advertising-Development of New Advertising Commercials$0$220,000($220,000) 4) Application Development-Data Warehouse$0$84,800($84,800) 5) Local Association Services-Strategic Thought Conference$0$34,900($34,900) 6) Communications- Update Find a REALTOR® and Member Profiles$0$24,200($24,200) 7) Local Association Services-NAR Organizational Alignment$100,000$113,400($13,400) 8) zipForm®-One-on-One Support$64,900$74,400($9,500) 9) Corporate Legal- zipForm® Misuse$10,000$10,800($800) 10) Governmental Relations-California Connection- Bridging The Gap$5,000 ($0) TOTAL 2015 Proposed Augmentations$179,900$1,273,300($1,093,400)

49. Programs Not Approved by SPF Committee

50. Economic/Media Consulting Allows C.A.R. to enhance the capability of its State Governmental Affairs effort, on an as needed basis, to more quickly initiate economic and/or communications/media consulting efforts to influence policy makers with data and/or "public pressure" to advance or defeat pending legislative policy initiatives. Revenue: $0 Total Expenses: ($50,000) Total Net Costs: ($50,000)

51. Outside Research on Mortgage Finance Reform Provides C.A.R. with the resources to contract with outside entities who are experts on mortgage finance and capital markets. In order to satisfy the need for reliable third-party analysis to determine the impact on California's housing market by various mortgage finance reform proposals. C.A.R. currently relies on papers published by third party "experts;" however, they often are contracted by non- REALTOR® entities and/or may have political motives. Revenue: $0 Total Expenses: ($50,000) Total Net Costs: ($50,000)

52. Office Manager Training Program Provides for two, one-day Office Manager Training Programs to be developed in conjunction with C.A.R. Education. These programs will include a 3-hour course for half of the session with the second half providing an Office Manager panel of experts within the profession to share how to enhance company culture, lower costs, lower risks, and provide for strong leadership within the real estate office. Revenue: $23,700 Total Expenses: ($28,900) Total Net Costs: ($5,200)

53. Team Services Unit As the proliferation of Real Estate Teams (Teams) impacts the traditional brokerage model and upends competition in the brokerage community, this program provides services specifically designed for Teams. It will explore the impact of the team structure on the business and seek to identify the needs of this expanding sub-set in order to provide highly specialized and customized services. Services include partnering with national organizations to conduct a survey of Teams, targeted outreach to this subset of membership, and complete a white paper on the impacts on the brokerage model and industry. Revenue: $0 Total Expenses: ($35,800) Total Net Costs: ($35,800)

54. Local Homeownership Fairs Provides resources to host two Homeownership Fairs which includes seminars preparing consumers on how to best enter or re-enter the housing market, for both sellers and buyers. Utilizing a collaboration of program partners including media partners, local associations, local ethnic REALTOR® organizations (AREAA, NAHREP, NAREB), local non-profit and housing groups, consumer oriented non-profits, and lenders providing consumers with several multilingual seminars and exhibits in a variety of formats that will educate them on their available options on entry or re-entry into homeownership, homeownership preservation, credit repair and the REALTOR® brand. Revenue: $26,500 Total Expenses: ($104,200) Total Net Costs: ($77,700)

55. Offer Transparency System Addresses one of the challenges that results from a marketplace characterized by a low housing inventory is a concern that not all offers are presented. This program will provide a means for buyers to be assured that offers have been presented and for sellers to have a means to verify that they have been presented with all offers made that is automated within the zipForm® platform. Revenue: $0 Total Expenses: ($205,000) Total Net Costs: ($205,000)

56. 2015 Capital Budget: Approved by SPF Committee

57. 2015 Proposed Capital Budget

58. Budget Action Items: Approved by SPF Committee

59. 2015 Budget Action Item 1.ACTION ITEM To approve a 2015-2017 strategic plan and 2015 budget with the following criteria: A.C.A.R. Operating Revenue: $29,618,900 C.A.R. Operating Cost: $30,128,200 Net Deficit (After Investment Income): $509,300 B.Issues Action Fund Program Allocation: $948,900 *IMPAC Contributions: $742,800 Total Issues Action Fund: $1,691,700

60. 2015 Budget Action Item (continue…) C. Political Activities Fund Program Allocation: $1,446,700 *IMPAC Contributions: $245,000 Total Political Activities Fund: $1,691,700 D. REALTOR® Action Assessment Program Allocation: $937,700 * CREPAC, CREIEC, and IMPAC Contributions: $7,351,500 Total REALTOR® Action Assessment: $8,289,200 * Estimated amount of Members’ direct contributions to the respective PACs as a percentage of the Issues Action Fund (44%), the Political Activities Fund (14%), and the REALTOR® Action Assessment (89%)

61. 2015 Budget Action Items (cont…) E. 131 budgeted C.A.R. staff positions. F. Membership dues, including $115 for operating programs, $10 for the Political Activities Fund, $10 for the Issues Action Fund, and $49 for the REALTOR® Action Assessment are set at a total of $184 per member (predicated on 2015 year end membership of 180,000). G. New member fee set at $30 per new member. H. A 2015 Capital Budget (funded with Association reserves) totaling $340,000

62. 2015 Budget Action Items (cont.) 2.ACTION ITEM To approve for members in areas not serviced by local associations an additional $30 in membership dues. This amount would be in excess of the dues approved for members coming through the local associations 3. ACTION ITEM That $388,500 be approved for an additional 3.5 percent retirement contribution to the C.A.R. and REBS employee Defined Contribution Retirement Plan for 2014, augmenting the previously approved budget of 10 percent.