Zombie only targets playing when visible?

Yes, because the second if statement makes sure the target is not a player

local dist = math.huge

local function findNearestTorso(pos)
    local list = workspace:GetChildren()
    for x = 1, #list do --cylces through each model
        local temp2 = list[x] --temp2 is set to each member of list
        if (temp2.className == "Model") and (temp2 ~= script.Parent) then
            local temp = temp2:findFirstChild("Torso") 
            local human = temp2:findFirstChild("Humanoid")
            local player = game.Players:GetPlayerFromCharacter(temp2)  --player is set to it's corresponding character if they match, if not player returns false
            if not player and (temp) and (human) and (human.Health > 0) and human.Parent.Name ~= "Zombie" then
--this is where you are getting confused, it checks and makes sure the target is NOT a player
                if (temp.Position - pos).magnitude < dist then
                    tochr = (temp.Position - pos)
                    local toPlayerRay = Ray.new(script.Parent.Head.Position, tochr)
                    local part = workspace:FindPartOnRay(toPlayerRay, script.Parent)
                    if part and part:IsDescendantOf(temp.Parent) then
                        print("soldier")
                        torso = temp
                    end
                end
                elseif player and (temp) and (human) and (human.Health > 0) and player.TeamColor ~= BrickColor.new("Bright green") then
                if (temp.Position - pos).magnitude < dist then
                    tochr = (temp.Position - pos)
                    local toPlayerRay = Ray.new(script.Parent.Head.Position, tochr)
                    local part = workspace:FindPartOnRay(toPlayerRay, script.Parent)
                    if part and part:IsDescendantOf(temp.Parent) then
                        torso = temp
                        print("player")
                    end
                end
            end
        end
    end
    return torso, tochr.magnitude
end