A property is subject to a mechanic's lien of $15,000 and a first mortgage of $175,000. At foreclosure, the property sells for $210,000. After paying foreclosure costs of $5,000, how much does the first mortgage holder receive?

Explanation

Net foreclosure proceeds = $210,000 – $5,000 = $205,000. The priority of liens matters. Generally, property taxes have first priority, then mechanics liens (depending on timing), then the first mortgage. Assuming first mortgage has priority here: first mortgage receives $175,000 (full amount). Remaining $30,000 goes to the mechanic's lien ($15,000) and equity ($15,000) to the owner.