Chances are you will be negotiating with both the bank and the seller in this scenario. It might be easier for you to negotiate primarily with the bank as they will ultimately be the decision-maker if the amount of money that you are offering to purchase the property is less than is required to pay back the current owner's mortgage/note in full.
You should be prepared to wait for in some cases weeks if not months for a response to your offer if it is coming directly from a bank rather than from the seller. Even if the seller agrees to a price with you, you may both be waiting on an approval from the bank if the bank will be shorted. I'd strongly suggest having the bank re-appraise the property now to get that ball rolling and possibly save you some time on the back end waiting for a response.
Good luck and let me know if I can be of further assistance.
Broker Associate, Sudler Sotheby's International Realty
:.....The homeowner is being warned that they're in default and need to do something about it, but at this point, the lender is unable to claim back the property and sell it to recoup their costs. The length of the grace period varies, as it's determined by state laws. Some states allow the grace period to last for as long as 6 months, but many states have shorter periods.
Once the property enters pre-foreclosure, there are a number of ways the homeowner can avoid having their property foreclosed on and sold by the lender.