Should real estate investors join the Better Business Bureau (BBB)? It depends. Are you a creative or traditional investor? Traditional investors don't need to join the BBB because either they use real estate agents or auctions to source their deals and are usually paying all cash for properties with no creative terms. However, creative real estate investors work directly with sellers to structure unique terms such as subject to financing, owner financing or lease purchase optioning. The more out-of-the-box your terms are, the more likely reputation and credibility can play a role in getting the deal. The Better Business Bureau is typically where people go to research if a company is legit or not. When they see a good rating, it can ease their fears about working with you. Therefore, real estate investors who operate creatively can benefit from having a good rating on the Better Business Bureau because it can help with reputation and credibility.
How to Get a Good BBB Rating
The Better Business Bureau has a controversial ratings system. If you are a brand new business owner and you submit your business information to the BBB, they will create a file about your company and you will typically not have a good rating. Why? The BBB would probably claim that you are a brand new company with no track record. What do you do if you want a good rating on the BBB but you recently started your business? Pay to become an Accredited member and surprisingly, your rating may instantly increase. This 20/20 BBB Investigation) exposes the deep, dark secret behind the Better Business Bureau, which is that historically, they have given preferential treatment, such as better ratings, to Accredited (paying) members.
Morally and ethically, you may not feel right about paying to get a good grade with the Better Business Bureau. But unfortunately, it can be helpful to have a good BBB rating and the vast majority of the general public is and will remain unaware of the BBB's dark secret. Therefore, if you have a new business, you may only have two choices; either you pay or you avoid the BBB altogether and hope your business doesn't show up in their system in the early years of your business.
The Costs to Join the BBB as an Accredited Member
The cost is usually around $400 per year to become Accredited, although this amount can vary slightly across the country. Plus, there can be several hoops to jump through, including getting a local business license for your business. If you have been operating your real estate investing business for several years without a business license and then go to apply for a business license with your local governmental authority, you can get hit with significant penalties and fees for not having set it up earlier. In one particular case, an investor walked into the business license office to inquire as to how to get a business license and left the building with an $800 bill for back business license fees. Ouch!
What if you have been operating as a real estate investor and have had your legal entity, such as an LLC, registered with the Secretary of State for several years? You can certainly become Accredited with the BBB and walk through all their hoops. Or, you can take advantage of a strategy that can get your business on the BBB with a good rating for FREE! Hopefully that got your attention.
The Free Way to Get a Good Rating on the BBB
If your legal entity has been in place for 3 years or more, here's an incredibly powerful strategy for getting a good rating on the BBB without paying $400 or jumping through the hoops that they require to become Accredited. You simply apply to become Accredited on the BBB website. You can talk with the BBB salesperson who calls you to get you to join, but instead of paying them $400 bucks, you decline joining at that moment. Then, the BBB will post your business on their website anyway, even if you didn't join, and show it as "Not Accredited." So long as your entity has been registered, it can be easily searched on your Secretary of State's website and the formation date shows as 3 years ago or more, the BBB will usually automatically show a good rating. Then, you simply operate a good business and take care of the people you do business with, and your rating will remain good overtime. This is what yours truly has done with his businesses.
What is the Value of Being Accredited
The problem with the free approach is that your business will not show on the website as Accredited. How important is that? Well, when a prospective seller is looking to get rid of their property and they are considering working with you, they may search the BBB website to check out your company. If they see a good rating, that will usually suffice for their research. Seeing that you are not accredited may bring up the objection, "Why isn't your business Accredited?" To which you can email them a link to this 20/20 youtube video and you can tell them that out of principle, you are choosing not to join the BBB. That objection will only come up rarely though. However, if you haven't had a business entity registered for at least 3 years, then paying may be the only way to get a good BBB rating.
Should You Join the BBB?
If you are a new creative real estate investor, without an entity that has been registered for 3 years, is it worth it to join the BBB and pay $400 as well as jump though all of their hoops? You really need to be dealing with a good number of sellers each month to make it worthwhile. If you are just getting started and are frightened to talk to sellers, don't go spend money on joining the BBB because credibility and reputation doesn't matter to you because you aren't talking to anyone. But if you are meeting with sellers consistently and structuring creative deals, you may get the occasional question as to whether you are a part of the BBB. If so, then you would know the immediate impact of joining the BBB...you could get more deals. It is better to "cross that bridge when you get there" rather than get set up with them far in advance of being hit with that objection from a seller. When it is all said and done, it can help to show up with a good rating on the BBB, but it isn't vital to your success.
What are your thoughts and experiences with joining the Better Business Bureau as a real estate investor?