I am in a similar situation in MA as well.

But does anyone have any experience with this type of property situation?

Sounds like you need to learn what the seller's situation is in order to understand the deal completely. 

I'm going to be very honest about my situation.

How would you more seasoned landlords handle this situation?

You should set up an ideal situation with one like a line of credit with them and then once you have a purchase, go to someone else and refi it. 

An update on my current deed situation:  The attorney who represents the lender (Ditech) sent a quit claim deed in the mail for me and the other said owner to have signed and notarized.

I am worried about Zillow being a detriment in this situation if a potential buyer sees the low price on Zillow. 

Talk directly to the home owner,see what they are doing to remedy the situation and feel them out as far as being potwntial seller before the foreclosure takes place.

For every 50 people who say "You have to form an LLC if you own rental properties", there's another 50 who say, "No, just get a good umbrella policy".Here's my situation........My wife and I purchased a single family home in NY a year and a half ago and have been fixing it up (don't ask why it's taken so long.