There has been a question as to how much the “foreclosure-gate scandal” would impact the market, according to CNN this morning, auctions are down by more than 30%:

In San Diego, according to broker Scott Cheng of Cheng Realty, who puts investors together with foreclosed properties, the number of auctions scheduled has fallen from 500 a day, to 300. “That part of my business has dried up,” Cheng said. “A lot of my investors have stopped looking.”

Cheng used to be able to find about three or four suitable homes a month for investors looking for a bargain. Now, he hasn’t done one of these deals since August.

“The ones who are really upset are the investors, who buy on the courthouse steps,” said Kevin Berman, a broker with Bankers Realty Services in Fort Lauderdale, Fla. “There used to be sometimes 700 sales a day. Now there are like, seven.”

Not only are fewer auctions on the courthouse steps, investors, who have driven a great deal of the market, are concerned about potential problems with buying foreclosures:

“Their concern is that homeowners will be more aggressive in fighting foreclosures even after the auction sale,” said Sean O’Toole, CEO of ForeclosureRadar.

For vulture investors, speed is essential — they do not want to tie up investments for months while attorneys argue.

They are also worried about being able to unload the property. Berman represented one investor who had purchased at auction, fixed the home up and went to contract with a buyer, who then backed out of the $240,000 deal. “His attorney told him he could find out the foreclosure wasn’t done right,” said Berman.

What sort of long-term effect is the foreclosure debacle liable to have on the market?  My suspicion is that while this is slowing the market short-term, it will only be a blip long term.  While some homeowners will undoubtedly tie up the courts contesting the foreclosure of their properties, the vast majority are being foreclosed on because they can’t afford to make the payments or maintain the property.  The vast majority of these properties should continue to slide into the foreclosure process uncontested, and the “march to the sea” will continue unabated.

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