What's the difference between a regular foreclosure and an REO foreclosure?

Property often becomes real estate owned (REO) when its value is less than the amount owed on it by the debtor. The bank always hires someone – a local attorney, usually – to make an opening bid on the property on the bank’s behalf, in order to start the bidding off at the amount owed on the note. The bank does not want to sell the property for less than is owed on it. If no one then bids higher than the bank’s opening bid, the property is “purchased” by the bank that holds the mortgage, and it becomes real estate owned. Very likely, the bank will instruct its bidding agent to take the names and addresses of those who appeared for the auction and showed interest in purchasing the property. The bank will then contact these people on its own to discuss selling the property to one of them.