Dear Steve,
I recently bought a house at auction. Before I did, I asked the auction company if there were any other liens on the property. I was told, "Not that we're aware of." Later, I was going through the newspaper and found the same house was being auctioned by a different auction company! I guess I just bought the second mortgage. What will happen?

Dear Sherry,
Hoo boy. This could be a real mess. That's not what you wanted to hear, I'm sure. But it does appear that you won the bid on a property that's been foreclosed by a second mortgagee. Since you were the successful bidder, it would make you owner of the property subject to satisfaction of the first mortgage -- seemingly. The hitch is that second auction, where a stake is held in the property by the first mortgagee, may be what's on the auction block. It sounds like either there's a big miscommunication here or something legally questionable is occurring. If you closed on your auction purchase at a title company, then the title company would bear responsibility for that second lien. But based on your note, it doesn't sound like you did.

There have been instances where the same or separate financial institutions have auctioned off first and second mortgages at different auctions, then told distraught buyers they weren't obliged to disclose anything about those other mortgages. Some of these deals involved auction firms that either gave the impression they were offering clear title to properties or were just playing dumb about other mortgages. However, some auction companies, it appears, truly had not been informed of the existence of other mortgages.

The end result left two new owners, both believing they had picked up a bargain-priced property, to duke it out for outright ownership. Yikes! See a good real estate attorney, and quick. If someone other than you "buys" the same home at that second auction, it will really muddy the waters. In fact, it may behoove you to contact the second auction group and tell them what is going on. But you better let your attorney make that determination.

In the meantime, you may be able to file what's called a "quiet title" action, which could serve to affirm your undisputed ownership and force the other lien holder -- presumably a financial institution -- to come forward. But I'm afraid some of this is conjecture because it's not completely clear what you bought at that auction and what the other auction house is selling at the second sale.