“Do we get paid if there is a lien on a piece of property that is foreclosed?”
The short answer is No. We have all seen the foreclosure notices filling the legal section of the newspapers in the past couple years. If the primary lender in first position on the property title is proceeding with the foreclosure, then all subsequent lien-holders would need to pay off all debts in front of them, including late fees and charges, in order to maintain their own lien.
Most of the time, there is little or no equity in foreclosed properties and subsequent lien holders have little ability to get their money, even if they can pay all the liens ahead of them. For example, if there is a $200,000 mortgage on a property worth $210,000, and SOCS held a lien in second place for $15,000, we would need to come up with the $200,000 plus late fees and charges, in cash, the day of the auction, just to maintain our own lien. We would need to sell the property to realize the income and pay our clients we are collecting for. It doesn’t make much sense to spend hundreds of thousands of dollars to try to make a few thousand back. And if the property doesn’t sell quickly, interest could easily erase any potential income very quickly.
In the end, foreclosures are difficult and costly for everyone concerned, and few if any creditor benefits from a foreclosure, as even the primary lien holder may now own the property for a debt of $200,000 and can’t even sell it for $190,000.