The foreclosure auction: Where one dream ends ... and another begins

The yellow envelopes scattered on a table were all that were left of the homeownership dreams of a dozen families in DuPage County.

Nothing in those envelopes showed how they settled into those homes or what their hopes were for the future before a job loss or high medical bills or any number of financial woes forced them to leave after a foreclosure.

The envelopes just contained cold numbers: address, amount owed to lender, overdue taxes, liens, legal fees, other costs. Those fees determined the opening bids for the homes.

The opportunity to buy a foreclosed house at potentially lower-than-market prices appealed to about 30 people gathered recently at the DuPage County Sheriff's Department auction in Wheaton. They ranged from regular investors to beginners.

The Dream Foreclosed is a four-part series looking at the local home foreclosure crisis. Stories Dreams end and begin at foreclosure auctions [11/27/07] How one couple lost their home [11/27/07] Salvaging the American dream [11/26/07] Miscommunication at heart of foreclosure crisis [11/26/07] Communication with lender key, counselor advises [11/26/07] Foreclosure tips: What you need to know [11/26/07] Families struggles against foreclosure [11/25/07] Many factors fed housing breakdown [11/25/07] Growing areas not safe from foreclosures [11/25/07] A glossary of foreclosure terms [11/25/07] Graphics Map of local foreclosures Excel document breaking down local foreclosures "This is my first time and I thought it was an opportunity to better myself and gain financially," said Josephine Koller of Winfield.The novice eyed a home in Winfield because it was nearby. She could rehab it and have it ready to resell in no time, she said."I've got my 10 percent right here," she said, referring to the down payment.Troubled homeowners can try a so-called short sale, in which the proceeds fall short of what is owed on the mortgage. Many lenders will agree to accept the proceeds of such a sale and forgive the rest of what is owed or allow for refinancing if an owner cannot make mortgage payments. But such sales may not work, especially in today's depressed housing market. Then, they head to the auction block. A buyer at such an auction pays the price for the home and that money is later divided up to pay off back taxes, liens and other fees tagged onto the home. The original owner then loses any equity they may have had in the home.In DuPage County, the auctions are held at the sheriff's office in Wheaton twice a week because of the increased number of foreclosures lately, compared to once a week last year.In the Northwest and West suburbs, 6,662 households received foreclosure notices from January through September. That amount exceeds the full year of 2006, which had 6,428, according to data provided by Kaneville-based Record Information Services. Throughout Illinois, 20,008 filings were made in the third quarter (July through September). That's one for every 257 households. That is about 12 percent higher than the previous quarter and 38 percent higher than the same period a year ago, according to foreclosure data service RealtyTrac Inc. in Irvine, Calif.A total of 635,159 foreclosure filings were reported nationwide during the third quarter, about a 30 percent increase from the previous quarter and an increase of nearly 100 percent from the third quarter of 2006.Area experts say the numbers are expected to increase by spring.At the recent DuPage auction, auctioneer Mary Lee Kopp opened the action. No fast-talking "going once, going twice." Instead, the longtime auctioneer explained in a serious tone about the process in precise detail.First, investors must register to be allowed to bid. Bidding then can start with $1 over the opening amount. Each bid thereafter must increase in $100 increments.The winning bidder must immediately pay 10 percent of the opening bid. The rest must be paid within 24 hours with a certified check. If the investor fails to pay in that time, he or she will lose the deposit and the property.A home in Aurora opened at $252,644. One in Naperville went to $335,750. The list continued.When Kopp got to the Winfield property, she announced the opening bid at about $308,000. Koller and others novices were startled. She was expecting a lower price."Well, I'm out," Koller said.And like many other first-timers, she sat in the back watching the regulars talk covertly on cell phones in the corridor.Having no bids for the Winfield property, Kopp said, "I now declare this property sold" back to Washington Mutual Bank. Kopp then officially logged the date and exact time of the declared sale, in case the previous homeowners filed bankruptcy as a last-ditch effort to help protect the property.When the home is declared sold at auction, the sale must be approved in court, often scheduled about two weeks later. The hearing ensures sales are free and clear of any last-minute bankruptcy or other filings.On another auction day, a regular investor bought a home for just $1 over the opening bid. He was happy with the deal, even though he didn't really know how many repairs would be necessary or if the home was in good condition.He and other regulars refused to talk about their investment businesses. They said they were concerned about how they would look, scooping up homes after families were forced to leave them.As many as 25 homes can sell in one day, said Peggy Rinck, sheriff's department civil division supervisor.One auctioneer had done the job before. Now two more people are needed to assist with the paperwork."We're just barely able to keep up now," Rinck said.