I have been keeping track of sale prices at foreclosure auctions and I
have noticed some of the sales are for second mortgages only.
Sometimes they are bought for more than their value sometimes less.
Why are people buying second mortgages?

There are a few reasons why people might want to control the second on
a property. If there is beleived to be equity in the property that
exceeds both notes owed the second is the cheapest way to buy control
in the property. So if the property goes to sale on the first note
then no matter who is at auction the person who controls the second
has the right to cash out the first for face value of the note and own
the property in full. This is the most logical reason why they would
want the second for more than face value. Also keep in mind anyone who
has interest say the owner of the first note may buy it at a higher
price to protect interest in there investment just to stave off others
who may want to try to buy it discounted or at face value. Lenders
aren't sposed to be in the real estate business of selling off
properties to make profits but in this day and age more and more are.
Another thing to consider would be the market the property is in. If
both notes where made in a place where the market has had say 10 %
growth and it the notes are 5 years old a 100,000 dollar property
would now be worth 150,000 dollars and be much attractive to a
reseller.

Why buy a second discounted is pretty obvious. At sale the first note
holder will almost always buy it out to protect there larger sum of
money they have invested. So anyone who does buy it discounted can
make a quick buck off the 1st note holder. There is a risk to holding
a second note though. If the first note is due and sale happens on the
first before the second. The second has to be strong enough to buy out
the first or the second is just sol.