Thank you for your question. Sorry to hear about that.This is general information only and does not create an attorney-client relationship.The service is answers, not good news. Please do not forget to leave a positive rating so I can receive credit for my work.Sadly, it sounds like you and your wife are living the realities of the dangers of buying real estate
at auction. Before ever showing up, real estate professionals conduct "due diligence", usually starting with a title search or at least a "foreclosure title report". THAT is where the senior liens will be identified.Yes, a buyer at auction for a junior lien takes the property "subject to" the senior liens. All of them that are "of record", as in recorded against the property. IF anything connected to the property can be found at the county recorder's office, THEN everyone dealing with that property is deemed to know about it. After all, it's a matter of public record and is easily enough accessed.But that ship has long since sailed.Once a person owns property subject to a senior lien, there are few options if those payments are not being made and that lender is determined to dump the property through foreclosure. The "record owner" of the property is *supposed to* get notice of any later foreclosure, both the Notice of Default which starts the "cure period", and the Notice of Sale which is when things get hairy and the time to respond is short.All of this applies to non-judicial foreclosures, which are the most common thing these days. Your question does not indicate whether a Trustee's Deed or other document was properly recorded after your wife bought the property. That can make a huge difference--BUT the Notice of Default and the Notice of Sale is also supposed to be posted on the property itself. Usually it's the front door. So, the occupant should know about it even if he or she is not the record owner.Beware of friends who know enough about the law to be wrong. You will need to consult with a local attorney who can analyze the documents AND the timeline for irregularities in the foreclosure. A person can look silly and waste a lot of money suing for injunctive relief if there really is no case there. We can't tell that from here, and our Terms of Service draw the line at providing legal advice--like analyzing Customer documents and applying the law to their specific situation. We just answer general questions about the law.IF there is any money left over after an auction and paying all sales costs and advertising the NOD and the NOSale and paying the attorneys for preparing the documents (or the title company if they did them), then the owner foreclosed on gets that surplus. This involves the tricky elements of what the place is worth, whether the loan being foreclosed on in upside-down or nearly so, how much the vultures surrounding the foreclosure piled onto the costs of sale bill, and how much of a bargain the buyer(s) at auction are looking for. Sadly, it is quite rare for these auctions to ever involve a bidding war between two prospective buyers.A person might have a right to dollar-for-dollar reimbursement for authorized improvements to land which the owner knew about, or sometimes if the owner simply got a financial benefit from them. But when you own it, there is no right to reimbursement but only a skinny right to have the property valued properly taking its newly-improved condition into account.Thank you. I hope this helps you understand these portions of real estate and foreclosure law. Please rate this answer as one of the three top faces or stars, and then click "SUBMIT". This is how Experts here get credit for our time and work. A rating in the bottom two faces/stars (or failing to submit the rating) is a sort of "ding" on my performance here, even for giving a correct answer. I strive to give an honest and informative answer for you, so I would appreciate recognition of my good faith efforts with a positive rating.