Investing locally would be ideal for sure.  

Fix it.We eliminate as much landscaping as possible: we take out flower beds and most decorative features, ideally, lawn mowing is the only job tenants have to do, because we know that's all we can expect from most.

It is pretty easy to keep it fully occupied but it does mean I turn away a ton of people who want a lease that doesn't quite fit my requirements. 

In the meantime I would love to have some helpful information or ideas to share with the buyers when we meet and ideally an agreement/contract we could fill out together once new terms are agreed to and then share that with the attorney so he could draft up the formal instrument for recording.If you have experience with this type of scenario, I’d love to hear any recommendations you have or any helpful resources you could point me to for the appropriate paperwork.Under foreclosure laws, you have to send appropriate notices and try to work with the borrower and offer a loan mod before foreclosure anyway. 

Any help is much appreciated - obviously a short term rental would be ideal, but it looks like thats out the question for now. 

Given your goals, Indy could be a great fit—affordable pricing, solid appreciation, and strong Section 8 demand with reliable property management options.

How do I deal with her and is it a lease violation?

I suggest focusing on building your "Core 4" team—agent, lender (one who can finance both the purchase/rehab and refinance is ideal), contractor, and property manager.

It wasn’t ideal, but it was the only way to keep the deal alive.I made the drive to her small town, met her at a local bank, and had the paperwork notarized.

Eventually I realized that you really just need to look for a deal that fits your criteria.