The owner who bought the house is in a mess, he needs to get rid of the second mortgage in order to clear title. It may take a while so your probably best walking away and finding something else.
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The owner can sell you the property, but he remains obligated to satisfy the second mortgage as it was not extinguished by the foreclosure and he remaisn repsonsible. This is not a title defect, but rather an encumbrance which can be removed for cash. If you have a contract to purchase, the seller remains obligated to sell to you (unless the contract specifically dictates otherwise in express terms) and satisfy the mortgage from your closing proceeds. In other words, you can enforce the ocntract should you choose to do so. I suggest you seek out the services of a lawyer in Palm Beach County to review your contract.