"REO" or Real Estate Owned are homes which have completed the foreclosure process that the bank or mortgage company now possesses..
If you buy a property during a foreclosure sale, you must pay at least the loan balance plus any interest and other fees amassed during the foreclosure process. You must also be prepared to pay with cash in hand. And on top of all that, you'll get the property 100% as is. That possibly could include prevailing liens and even current tenants that may require expulsion.
A bank-owned property, by contrast, is a more tidy and attractive option. The REO property did not find a buyer during foreclosure auction. The lender now owns it. The bank will deal with the removal of tax liens, evict occupants if needed and generally prepare for the issuance of a title insurance policy to the buyer at closing.
