This would allow us to come to the table with less funds out of pocket on the front end when starting construction.Is the best way to complete the transfer of ownership through a traditional sale registered with the county? 

I plan to sale the lots that way.

My foreclosure sale date is the end of March 2023 and I will not anticipate getting paid from the sale for another 5-6 months. 

Last year I bought my first property at a foreclosure sale in Dane county, a small 2 bed 1 bath condo on the east side of Madison.

I would recommend fixing it and then determining whether or not to sell based on cash flow and profit after the sale.

As others have said a 1031 exchange, which allows for the deferral of capital gains taxes, is not applicable to properties held primarily for sale, such as a flip.If your goal is to defer taxes, you might consider holding the property as a rental for a period to qualify it as an investment property, which could then potentially be eligible for a 1031 exchange.

Foreclosure sale price + accrued costs mean sale price on satisfies loan.  

@Tony Thomas So, is the seller increasing their sale price in exchange for a 0% interest rate?

My experience is though, that any fed backed loan, automatically is offered a chance to do a loan mod. 

I'm going to get with the sales rep and look into this further to see if there's any other option available or if we can make a referral to a local agent in your area that might be better positioned to assist.