Real-estate owned is a designation given to properties which are owned by a lender due to an unsuccessful foreclosure sale at auction.
REO properties can sometimes present an opportunity for a buyer to be purchased for below market value as most banks would prefer to reinvest the proceeds, rather than waste time marketing the property for an extended period.
Additionally, the bank will often market the property “as-is” meaning they are unwilling to make any repairs to the property, which can make financing tricky.