I received a call from my broker today, telling me that the bank now owns '123 Main Street', which I have had listed for sale for four months. What? How can that be? I spoke to the seller less than a week ago. We discussed pricing changes and possible dates for an open house. There was never any mention of the impending foreclosure, although the seller surely knew about it.
From the seller's point of view, I can see how they might justify their nondisclosure: "But we were hoping we would get a contract before then." I can also understand the embarrassment that one might feel. However, I could have helped these people.
In the current market, many Realtors have gained experience working with short sales. A short sale is when a mortgage company agrees to accept less than is owed on a mortgage as full payment of the debt. In Missouri, most lenders report the account as 'settled' to the credit bureaus, salvaging the borrower's credit and saving them from foreclosure.
As a seller, sticking your head in the sand or keeping your Realtor in the dark doesn't do anyone any good. These sellers almost certainly would have qualified for a short sale. Instead, their credit is ruined and they lost their home. The bottom line is this: FULL DISCLOSURE to your agent. Let them help you, or at least try. If you're facing foreclosure, you have nothing more to lose.