Usually when a home goes through the foreclosure process in Arizona all liens against it are extinguished. Of course, more can accrue after the foreclosure has occurred, from mechanics' liens to tax liens, HOA liens and so on. It is not clear whether your seller bought the home at an auction of bulk foreclosed homes (such as an REDC auction - http://www.auction.com) or on the courthouse steps at Trustee's sale (when the bank forecloses), or something else.
How did you find this home? Do you have any agent representing you? I'd certainly agree that there are some red flags with this home, and I wouldn't consider proceeding without a title search and title insurance paid for by the seller.
Hope this helps.
RE/MAX Casa Grande Yost Realty
Fairfax Mortgage Investments
Best listen to your attorney.....there are multiple "red flags" that should encourage you to steer clear of this type of opportunity.
Our recommendation....go with your attorneys information and continue looking1
I be concerned if you should contact the Police for potential fraud alert
Lynn911 Dallas Realtor & Consultant, Loan Officer, Credit Repair Advisor
The Michael Group - Dallas Business Journal Top Ranked Realtors