John Burley's Dog and Pony Show

In my post talking about John Burley’s book, I hypothesized that it’s probably as information-rich as his Boot Camp, even though it's $4980 cheaper. If you’ve read Burley’s promotional material for his Camp, you might object to my characterization, because, for example, on Day 2, the attendees are taken to downtown Phoenix to witness a trustee sale. Such an activity, however, is a complete waste of time, for several reasons.

In the first place, what is there to learn by attending a trustee’s sale? It’s just your standard auction, and who isn’t familiar with that? This is the 21st century. Who hasn’t been on eBay?

Next, as even Burley points out, these auctions are all cash. The typical Burley student doesn’t have any cash—or why would they be attending the Boot Camp? On top of that, most of the attendees are there to learn about Burley’s wrap technique, the point of which is to use as little cash as possible (otherwise your cash-on-cash returns evaporate). So, not only are Burley’s students unlikely to ever be capable of bidding in a trustee auction, they’re not likely ever to want to do so, either.

Something tells me that Burley also probably doesn’t mention a number of serious drawbacks to the trustee sale. It’s rare for a “distressed property” to even get to the auction, so the ones that do are likely to have a storied history. The owner has to have played ostrich—putting the mortgage several months into arrears (necessary before the foreclosure process can even begin). Then public notice of the auction has to happen at least 60 days prior. A lot can happen in those 5 to 6+ months. How many investors specializing in distressed properties do you think have spoken to the owner during that time (and still didn’t manage to put together a deal)? How much maintenance do you think the owner has been doing on the property? Do you think the owner is going to be happy to leave? If the house gets to auction then there’s a near certainty that it has a real problem—one that’s probably not going to be profitable for you to solve, even at “thirty to seventy cents on the dollar.”

Once bidding on the house starts, what do you think happens? The first thing is that the bank holding the primary mortgage bids the amount of the balance owed—to ensure they get paid. If that’s 90% of the market value of the home, then where’s your money going to be made? And what if it’s you who ends up making the winning bid? The question that should immediately come to mind is, “What do all these other people know that I don’t?” The Winner’s Curse isn’t just some witch doctor’s superstition.

Given all this, Boot Camp attendees are, in reality, paying about $500 for little more than a dog and pony show. John Burley, on the other hand, is laughing all the way to the bank.