I invested $40K in my relative's home. It was agreed that I would a.) receive money in event of sale or b.) inherit the house. They have decided to walk away and allow a foreclosure. I am not in a position to buy the house and property sales here are very slow so I can't sell to buy. Can I file a lien to get my money back? Is there an advantage if they quit claim the property deed to me? Can I use the lien as a down payment?

Ok, you invested 40 K but did not put a lien on the home, they now have another mortgage in place that they can not pay.

You may place a lien but remember the 1st mortgage is paid first, so if it forecloses, most likely it sells for less than the full first mortgage and you will get nothing, seldom does the second mortgage holder get paid at a foreclousure. Ifyou wish to buy the property, or take over the payments, you can most likely keep the house, but let a real estate attorney work out the details for you.

Your 40 is just equity in the home, so if they want to turn it over to you, all you have in it, now is the equity of the home,