REO stands for “Real Estate Owned” 

These are properties that have gone through foreclosure and are now owned by the bank or mortgage company.  This is not the same as a property up for foreclosure auction.  When buying a property during a foreclosure sale, you must pay at least the loan balance plus any interest and other fees accumulated during the foreclosure process.   

A REO, by contrast, is a much “cleaner” and attractive transaction than a foreclosure auction. The REO property did not find a buyer during foreclosure auction.  The bank now owns it.  In some cases, the bank is able to price these properties less than what a minimum bid foreclosure auction would require.  The bank will see to 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.  Often the property has been cleaned up and some repairs may have been made.  Closing costs and other credits are often available from the bank, as well as possible special financing may be available.