An REO (Real Estate Owned) property is property that goes back to the bank after an unsuccessful attempt at foreclosure auction. Most often, what is actually owed on the property is greater than what the property is worth so few foreclosure auctions result in a sale. The bank then owns the property and the mortgage loan no longer exsists.
Not all REO Properties are a great deal so it is extermely important to be informed before making an offer. A Buyer's Agent can help negotiate and gather information and can also help navigate the process. Most REO Properties are "As Is" so little information on property is disclosed by banks. Most of the time these properties are found in rough condition and may need some work, but it is important to have an inspection done so you are informed on the structure enough to make a sound decision.