After Lance abruptly disappears into a small room, Nora is frightened by the vision of a wild-haired old woman. When the others leave the cellar, Lance and Nora linger behind to explore. Watson gives the guests a tour of the house, detailing the gruesome deaths that occurred in several rooms, including the wine cellar where a jealous husband murdered his wife by pushing her into a vat of acid that still exists beneath a large trap door. Later, Frederick introduces himself to the others and explains that at midnight the servants will lock them into the mansion for twelve hours and that all communication with the outside will be cut off. In private, Frederick and Annabelle argue about the party, which Frederick admits is a ploy to force Annabelle into revealing that she only wants access to his fortune.
Watson then reveals that there have been seven inexplicable, brutal murders in the house, including that of his brother, and he believes the victims' ghosts continue to haunt the premises. Shortly after their arrival, Lance prevents Nora from being struck by a falling chandelier. Although puzzled by the invitations, the guests are in need of the money and agree to participate.
Frederick bribes the guests, test pilot Lance Schroeder, newspaper columnist Ruth Bridges, physician David Trent, secretary Nora Manning and Watson, by promising ten thousand dollars to each if he or she spends the entire night at the mansion. Wealthy former playboy Frederick Loren rents the haunted mansion of Watson Pritchard for one night and invites five strangers on the pretense that he is throwing his wife Annabelle a party.