If I sell the house, can I do the 1033 exchange too?

You can make house hacking work anywhere, really.

Seller has decided to walk with our EM and put the house back on the market.

I have seen this same house that is vacant (all the classic signs) I have located the owner ( I have not reached out to her yet).

House gets foreclosed on when a borrower is not paying its debt obligations - typically its mortgage.buying foreclosures is not for the faint of heart as you have no idea of the interior of these properties lastly while it can be beneficial also realize if there are a lot in an area those homes are the new comps when trying to sell so it lowers home values in an area 

if i were to acquire these and have them be owner financed, I would want clear title and the other mortgage on this lot removed - especially if my loan has a balloon on it that matures prior to the existing loan, as how would to provide clear title?

I've dealt with this exact same situation, and ontop of everything I was dealing with the Section 8 housing authority because my tenant was a voucher holder. 

Did you get the house recorded with the LLC in place? 

The house is set way back at the end of a long winding driveway, the front is fully fenced for maximum privacy. 

I have been on BP a long time and maybe about eight years ago , a person had a small chance of finding a posted house for sale here that can be flipped.