The more complicated answer is if you do quitclaim the property you will be in breach of the mortgage agreement in the bank May exercise the due on sale clause.The third scenario would be to buy commercial property using commercial lending any such instance buying and financing for an entity is quite common practice.So, coming back to the beginning of this answer it's all about the type of investment you're looking to do and the risk involved in doing so.I do want to share my two cents on the matter. 

Without running the math, I'd be hesitant to add complication to a property.

Why add more stress or make your life more complicated by working to resolve the current property owner's issues on a this project?

Maybe they have some other bill they need to pay such as a medical bill their insurance considers unnecessary so they have to pay out of pocket for it and time is important to get treatment. 

Due to many complications, we fell into default with the 2nd lien holder and owe 170k and are facing foreclosure, set to be sold in auction soon.

While an LSA can play the role of collecting / remitting payments, accounting and enforcement in the event of default (foreclosure), its not necessary to have an LSA and may add extra layers of complication or expense.I’ve found that if you have a reliable escrow agent: they will handle the crafting of the note and mortgage, arrange for necessary signing / notarizing / recording of the documents & handle distribution of loan funds.

I inevitably would like everything to flow through a single holding LLC, but seems very complicated when considering Title, Mortgage, Management, etc.  

They're excel based and can be quite complicated. 

Mistakes are easy to make, & you should also have a CPA guiding you - well before tax time while you still have time to do the planning to avoid unnecessary costs.  

A good deal is a bit more complicated than the cap rate.