In the meantime I am looking for investment SFR's in the 85-125 range in which to use the remainder of my capital from my first sale as a down payment.

Looking at the Fannie Mae website, I found the following requirements:Cash-out refinance transactions must meet the following requirements: The transaction must be used to pay off existing mortgages by obtaining a new first mortgage secured by the same property or be a new mortgage on a property that does not have a mortgage lien against it.Properties listed for sale in the six months preceding the disbursement date of the new mortgage loan are limited to 70% LTV, CLTV, and HCLTV ratios (or less if mandated by the specific product, occupancy, or property type – for example, 65% for manufactured homes).Note: Properties that were listed for sale must have been taken off the market on or before the disbursement date of the new mortgage loan.The property must have been purchased (or acquired) by the borrower at least six months prior to the disbursement date of the new mortgage loan except for the following: There is no waiting period if the lender documents that the borrower acquired the property through an inheritance or was legally awarded the property (divorce, separation, or dissolution of a domestic partnership).

In my case I used it to link the upstairs and downstairs portions of my listings to the main house.

For my own curiosity, can you explain why the lien would need to be cleared up by the seller before the sale? 

But, are you referring to auctions that the lending institutions hold ....or are you referring to auctions private companies hold after the foreclosure sale ... or are you referring to pre-foreclosure auctions ? 

Mary, If you intend to list the house for sale.

Does this affect the sale?

I didn't even know it went up for sale.

They are still motivated, however and may be willing to discount the property for let's say 15-20% off retail for a quick sale.

BP,I am a part time real estate investor with my full time job being in medical device sales.