In short, my husband was in a traffic accident and we had to sue the person to be paid for the damages incurred to his car, medical bills, etc. The people never responded to the initial lawsuit, so judgement was in favor of us. The other party never responded to our request for payment after the lawsuit was found in favor of us, so we put a lien on their home. The home is now in foreclosure and we are the second lien holder (mortgage company being the first lien holder). There is also another lien that was recorded after us (some construction company), and the 4th lien holder is the Federal IRS. From what I've read, the mortgage company gets the money from the sale of the home, and then do we get paid (if at all), or does the IRS move into the second lien holder spot?

Actually a government lien takes first precendence. So the IRS will get paid first, then the mortgage lender then you.

So I wouldn't count on getting paid.

You don't indicate which state you are in, but in the Pacific Northwest, you can bid on the property at the foreclosure auction. Get a Title Report on the property and find out how much each of the liens are. Don't forget the arrearage of the mortgage and any unpaid property taxes. After you have them itemized, you can then determine if it is worth bidding on the property. You have to have a pretty good idea of what the property is worth. If there is enough equity after all expenses to take ownership and sell the house to pay off your lien, that is one avenue. Add Real Estate fees to sell the house after you own it. (Not usually worth doing, but on occasion it works.)

If someone outbids you past the amount of your lien, you get paid.

Another, simpler way is to do a wage garnishment. Talk to an attorney.