If the house does go to Trustee Sale, it may be purchased by an investor who will then notify you that they are now the owner of the property. It could also become a bank owned asset or REO. If it does become a REO, the bank will send a realtor to your home to notify you that you no longer own the home and ask you to vacate. Depending upon who the servicer is you may be offered cash for keys to leave the house in broom swept condition.
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The chances of it getting taken back the bank are quite strong. The chances of it actually selling as a short sale are not that great, especially since it doesn't even have an offer yet. The only way it will be bought by someone other than the bank at the auction is if there is equity in it. However, if the property had equity, then it most likely wouldn't be a short sale. I would say that there's a 90% chance it will end up becoming bank owned. Additionally, banks can take anywhere from 2 weeks (fast) to 3 months (slow) to get the property ready to be sold.
The property will sell at foreclosure auction, but most probably it will be the bank holding the note the one that will end up buying it. They are usually the highest bidder on their own properties. After that the bank can sell it to investors as a package (wholesale), or might end up putting it back on the market as an REO. Depending on the bank that might take a couple of months.
ABR - Accredited Buyer Representative