Absolutely....the home is the possession of the present owner until he bank legally assumes ownership through foreclosure.
Knowing the direction this home is heading, it would be wise to find out what the anticipated timeline on their short sale would be...this is something most often easier said than done however. In these situations it's often a race to the finish between a foreclosure and a short sale. Either way your stay could be shortened by either process. With this said, knowing the conditions this scenario presents could offer you some negotiation power to achieve a good monthly rental break.
Oh, did I mention that as a renter in this situation you can probably plan on regular interuptions by potential buyers wishing to view the property...this again, another negotiations chip.
Either process could take weeks, months or even years....depending on where they are in the process and their level of representation. Be sure you have a clear appreciation of where the owner stands in this process.