My hope is that the property will continue to gain value because of the multiple bedrooms, small fenced yard and parking, as well as proximity to public transportation in an area filling in with high rises.So my big question mark is whether to proceed, given that this house is directly across the street from a low-income housing development.

Would you recommend that before proceeding with an offer on the property through my realtor, I get a cost break out with the specifics of the loan from my broker? 

Using these two examples, you could simply do Deal 2 first and then Deal 1 with the proceeds of period 1 in Deal 2.

At this point, all they can do is proceed as Andrea above so competently outlined.I'd tread very carefully here.

When the property is sold, the title company wires (or writes a check) for the net proceeds to the LLC.

I'm not seeing where someone would buy a piece of property that they know could be taken through Eminent Domain proceedings for far less than what they purchased it for.

Hell, give me a day or 2, I'll sell off all my real estate holdings and give you those proceeds too!

You are right that dividing the spoils would require some work but that is really not related to the foreclosure but to the division of the proceeds from the foreclosure sale.J Scott, the comparison to criminals is somewhat incorrect because criminal acts are intentional whereas the banks seem to just be doing occasional screwups.

How should I proceed?

Before we even bought these houses he printed out a "Proceeds from sale" sheet listing how much we would end up with.