There is nothing ethically wrong with it, in my opinion. If you were able to purchase the home and delay the sale, the bank may end up netting more money from the traditional sale route (or short sale route) than if it had gone to Sheriff's Sale. If the bank nets more money, the seller is looking at a lesser amount of deficiency judgment, so it could be a win-win. It will certainly be an emotional conversation, though. On one hand, the seller may wonder how you found out and be somewhat embarrassed...the other extreme is that they could be hostile. I would approach them calmly and have your contact info written out ahead of time. They might need a day or "night to sleep" on any information you relay to them. So, be prepared to leave it with them, but initially walk away without an agreement to sell/purchase. It never hurts to reach out, though!