The reality of the situation is that the bank can do whatever they want to do with their property. The only thing that will stop a foreclosure is a COMPLETED short sale packet. Sadly enough if the packet was missing even one small thing (such as a bank statement from the seller) and the foreclosure date arrives, do not pass go, do not collect $200. Have your agent contact the listing agent and see if they have the listing any more. If they do not, that means it's been foreclosed upon. Most likely it was sold to another bank or investor and will be listed for sale again, most likely for a very good price as well as these investors do not like to sit on inventory. You can either move on, or if there is not a lot of inventory in the area you are looking, hold off or try to track down the new seller (not sure how easy this will be but you may ask your agent or attorney if they can help.) to see if they will be putting it back on the market and when.
Best of luck,