There has been excellent advice posted here already, so I would reiterate that more information on your specific situation would be needed in order to give better info, but I will add a few general points. Sometimes if the second lien is small (under $5,000) then the first mortgage holder may elect to simply pay it off at closing rather then going to the time and expense of re-foreclosing on the property to remove the lien. Or if you are getting a good enough deal on the property you may decide to settle with the second lien holder yourself to get the deal closed. Depending on who holds the lien they may take a reduced payoff if they realize that they will get nothing if the first mortgage holder re-forecloses the property. It all comes down to time and money. I had a similar situation last week and a $2,000 second lien was discovered. The seller (the bank that foreclosed on the property) decided it was in their interest to just go ahead and pay the lien to get the deal done, maybe your deal will work out as easy as that too. Good luck!

My name is Robin Speronis and I am the Owner/Broker of Zen Real Estate of Southwest Florida, http://www.AskZenRealEstate.com and I was in the exact same situation in December 2008 with one of my buyers. They were the successful bid on a foreclosed home and since they were paying cash, they wanted to close in two to three weeks. The title company found during their title search that one of the parties with an interest in the property was not served in the foreclosure.

My buyers were from out of state and relocating to Florida and living in a hotel until closing, so when the bank said that they would have to re-foreclose in order to clear title and that that may take up to a year, panick struck. Prices were already going up and we had difficulty finding this one (a newer 3/2/2 pool home in good condition on the water) and we were very doubtful that we could find another deal like this.

So I did my own investigation and found the two parties that hadn't been served - one was out out state - and covinced them with great difficulty (they at first thought it was a scam) to sign a quit claim deed over to my buyers. We ended up closing in Febuary 2009 - but we did close.

So I'm guessing that unless someone can get to the second mortgage holder with an incentive to sign a quit claim deed, then the house would have to be re-foreclosured and that takes time - maybe up to a year.

Good luck

There are way too many variables to answer this question - I would need more information.

You should ask your Realtor, ask your title company, or ask your attorney. I have had similar cases including ones where the FIRST mortgage was not foreclosed on. It can take a few weeks, or a few months.

As a realtor I have learned to look for unsatisfied mortgages or mortgages where the mortgagee is not listed as co-defendant while in negotiations on REO, or even before an offer is made if it is a short sale. Often the listing agent doesn't even know how many mortgages are in place.

Good luck!

Phil Hanner