However, according to him, they have some magic ethereal list of certificates that are about to enter forclosure that they purchase from banks/hedge funds, as the banks/funds do not want to own them once they foreclose because it tips the balance sheet and would be considered a negative asset and would be too much work to liquidate. 

In one word it's, "MAGIC".Honestly I don't know the details of their algorithm, but I can guarantee it is based partially around the following 2 things, recent sales and tax assessments.More important is how accurate are these Z'estimates?

Just talk with people and show honest genuine concern and you will be amazed at the opportunities that will magically present themselves.

No single magic formula.

In addition, you need to ask the seller the magic question, which is what's the lowest he will take for a quick, cash closing, taking the house as-is.

I have over 10 years of real estate experience, most recently in Community Development of Low-Income Communities, using tax incentives such as LIHTC, NMTC, and HTC. 

Does that seem less magical to y'all?

So, the magic question.

This software claims to scour the internet finding deals for you, in a fraction of the time it would take for you to look for them yourself.Now, I didn't expect this software to perform any magic, but I was curious if it would bring me a nice, neat compilation of off-market properties in the areas I am interested in.

there is bot one magic solution… I just deleted an email from the MLS that would be a perfect flip close to your location… Foreclosure auctions are a good place to start also, but would require substantial knowledge -  and without that knowledge, your risk would be exponentially higher than purchasing from the MLS -  partnering is also a good place to start if you can find someone willing to take you under their wing -  The bottom line---you don't know if you can swim until you jump in the water