An REO (real estate owned) property is property that is currently owned by a bank and not an individual.  For example, if a foreclosure doesn't sell at auction, it ends up an REO property.  Unlike foreclosures, REO properties are not sold via auction.  They tend to follow the traditional means of sale, just as any other individual-owned property would, with a few exceptions.  Typically, these properties are sold "as is", the buyer must have a full approval letter before submitting their offer, a minimum deposit may be required, most banks won't allow changes to the sales contract and properties tend to be "fixer-uppers" in need of some work.