The house I'm renting is in foreclosure. What are my rights?

My family and I moved into our house (rental) in October 2012, located in Washington state. The owner signed us up to a 6-month lease, with an option to buy and he said he would make us a "great offer" if we chose to do that. So we moved in and two weeks later a man knocked on the door. He was a small time handyman type that was hired by such and such bank to make repairs to the house and get it ready to sell. Excuse me? He was obviously very surprised to see the place had occupants. He informed me that the house is in foreclosure and that he was told the house was vacant. I became very suspicious and wasn't sure what was going on. He asked if he could come in and take pictures, so that he could show the company that hired him that the house was occupied. I told him he could take what pictures he could outside the house, but he's NOT coming in. I told him that I didn't know about any foreclosure and that he needed to talk to the owner, who lives right across the street. He comes back and says there was no one home, but that they have a package on their doorstep in an envelope that he recognized as "loan modification" application paperwork. He tried to clarify for me and his undertone insinuated that I was in deep crap and might need to move my family unexpectedly. I immediately contacted the owner and demanded an explanation. He was his usual calm, relaxed and cheery self and insisted that I have nothing to worry about. He said the previous tenant was not paying him rent and skipped out on the lease and that's how the owner got behind on payments. He insisted the loan would be modified and that everything would be fine and I took his word for it.

Fast forward 8 months and I get a letter taped to my front door from this same lender (banker, scheister, whatever) that has a heading "NOTICE OF TRUSTEE'S SALE". I think it was meant to go to the owner. It talks about the payments that the owner is behind (over $23,000 in payments!) and that no payments have been made lately. At this point I wonder what our landlord has been doing with our money if he's not paying the mortgage. The letter states that the house will be put up for auction September 20, 2013 to the highest bidder, etc.

The landlord has been trying VERY hard to get us to buy the house from him and has offered us some really good discounts. We've been working on our credit and preparing to do that, until I got this letter. Now I am planning on honoring our lease that ends September 31st and moving out. In the meantime I am hearing that various bankers, real-estate agents, etc. Have financial incentives to get us out of the house quicker and that they are known for their shady practices.

We have no money at all and no attorney works for free. So, that being said, where else do I go to find out the truth about what's going on, for tenant rights and protection in this situation. I don't believe the tenant/landlord rights booklet has anything about foreclosures in it. I feel like our landlord is up to something and just don't really trust him anymore. Who do I talk to about this? Anyone been through this?

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