One thing that should be mentioned, the recent amendments to the Distressed Property law mean that buyers no longer need to avoid this type of situation. Assuming the property is listed (or the seller has an attorney), they can pretty much go after it without concern, as long as they don't negotiate a deal where the owner continues to live in the property, has an option to purchase it back, etc., basically a straight sale. There are some possible technical traps, but those should be very rare. A buyer should contact their own attorney in such situations.
This is actually good news for the buyers and the sellers, because the sellers would rather deal with a buyer negotiating hard than end up being foreclosed. The legislature last year didn't understand that, and it most likely resulted in a lot more foreclosures than would have otherwise occurred.