Auction: End of the Foreclosure Road

The foreclosure auction is a strange thing to witness.

There is no man at a podium swinging a gavel, no seats for the audience or numbers to hold up.

Instead, an auctioneer, typically an employee of a foreclosure noticing company arrives at a city park, finds a spot and begins reading the addresses of the homes slated for sale.

He doesn’t announce his presence. He doesn’t call order. He simply opens a file folder of foreclosed properties and begins reading them off.

It’s a no-nonsense, quick and dirty kind of deal that is all business and no emotion.

Well, at least for the auctioneer.

There are 123 homes in Petaluma that have received a notice of default this month and another 106 that are scheduled for auction. All of which means that every single day, homes of local families who have fallen behind on payments, are sold off to the highest bidder in parks, parking lots of community centers and other public venues, since a foreclosure sale must take place on public property.

Houses are sold as is and payment must be made on the spot and in the form of a cashier’s check. 

One place in Petaluma foreclosure auctions are held is the parking lot of , where every day a man arrives at 11am to auction off homes to the bidders who gather. On the day Petaluma Patch attended, the auction drew a group of about 10 people, some looking to buy cheap real estate and others who were there to rescue their homes.

Click on the slideshow on the right to see photos of the auction and hear several interviews

One of the men in the group was Jonathan Fillbach, a renter who was there to tell the auctioneer that the owner of the home he was living in had just filed for bankruptcy in an effort to stop the home from being sold.

“They don’t know that and that’s what I’m here to tell them,” Fillbach said. “I’m just here to observe that they follow all the bankruptcy procedures.”

Since the owner fell behind on payments, Fillbach says he has been bombarded with letters from services offering to stop the foreclosure, making it hard to know which ones were from certified loan modifiers and which ones were scams. Meanwhile, no one at the local branch of Bank of America, where the homeowner’s loan was being serviced, could answer any of her questions, sending her to offices in Modesto and beyond, he said.

Another person in the audience was John Lowry, the executive director of Burbank Housing, an organization that develops low-income housing throughout Sonoma County. Lowry had his eye on a home in Windsor that had been foreclosed that he was eager to get back for his organization.

“Our hope is to return the property to another first-time home buyer who could afford the house,” Lowry said, adding that this was the first such purchase for his organization and that it offered many benefits.

“There is a lot of secondary financing that will actually be eliminated by the foreclosure, so we think we’ll be able to offer it for an affordable price.”

Before the housing market crash, it took an average of two years from the time someone fell behind on their payments to when they received a notice that their home was going to be sold.

Today, the process can take as little as six months.

“Banks are becoming more adept at foreclosing,” said Andrew Kern, a Petaluma attorney who specializes in bankruptcies. “They seem to be spending a lot less time on it. I have people who are three to four months behind payments and they are already getting notice of default.”

When a homeowner falls behind on their payments, they first receive a notice of default on their property. If they don’t make up the payments within the next three months, they receive a notice of sale, typically posted on their door. That’s a warning that they have three weeks to either try to modify their loan or declare bankruptcy in order to avoid the bank taking over the home.

But a foreclosure or short sale, as devastating as it may be, is not the end of it. Under current bank guidelines, homeowners who have lost their properties have bad credit for three years, according to CJ Holmes, a Santa Rosa real estate agent.

“Right now over 6,800 families in Sonoma County can’t buy a home, even if they have good credit, because they have a short sale on their record,” Holmes said. “People can’t get a loan for three years and that’s why home prices are falling and will continue to do so until this rule is changed.”

Holmes has launched an online campaign to encourage banks to reduce the penalty to homeowners to one year. She is also pushing for banks to allow homeowners to purchase their own home short, meaning they would make payments on the current value of the home and not what they purchased it for.

The idea is to help people remain in their homes instead of having them be taken over by the bank, she said, something that would work in the banks’ interest since it would stimulate home purchases.

“When a home is foreclosed on, it affects everyone’s property, even if you’re making all your payments. It just pushes more people upside down and gives fewer and fewer people solutions.”

But with the foreclosure machine well-oiled after three years of running at full speed, the question remains: will the banks listen?

Have you attended a foreclosure auction? What's your take? Share your thoughts in the comments below.