Foreclosure:

Foreclosure is the process where, after a buyer has failed to make the payments as agreed, and has been served with a notice of default, the property is sold at auction.  This auction process is the foreclosure. The borrower still owns the property until the auctioneer says sold, and may stop the sale by paying what is owed plus applicable cost. Obviously, the defaulting borrower, is not going to let you in to see the property before the foreclosure auction.   After the auction, if no one bids successfully on the property, the foreclosing bank, becomes the new owner.  Property owned by the bank after a foreclosure is called Real Estate Owned or REO.

Real Estate Owned (REO)

Once the lender has completed the foreclosure process and gone to auction, if no one bids on the property, or the lender has the highest bid, then the property becomes Real Estate Owned or REO.  These properties are usually available for purchase and will usually be listed for sale with a real estate agent or the lenders in house company. Once listed, this property becomes a fairly normal transaction just like any other home for sale with one notable exception. That exception is that banks typically take a longer to approve any offer, so patience is a must. But unlike the foreclosure process, you can inspect the property prior to making your offer, the bank may make some repairs and you can obtain financing for the property. The lender may include terms of sale requiring you to obtaining your loan from them, or to obtain the loan from anyone but them.