Folder with question mark error

Hi everyone, I have an iMac A1195 2006 which was running OS X Lion great no issues, I have decided to sell it on so I erased the hard drive and tried to re install Lion. I am now greeted with the folder with question mark in it and cannot proceed any further. I have tried my install discs from my MacBook and that lets me get into disk utility and I have tried first aid and all is fine it recognises the hard drive and has no problems but when I try to get to boot into recovery from the iMac itself I get the dreaded folder. I also have Lion on a USB pen drive but I cannot get it to boot from the drive. I have tried everything I can find off the net but nothing seems to work. Incidentally the disk off my Macbook boots up fine it’s OS X 10.6.1 but the imac says its not compatable don’t know why because I had 10.7.5 installed. Can anyone help me as I’m totally stuck, the machine itself is mint and works fine, I just need help getting the software back up and running

many thanks in advance

Bill