What is an REO, and Should I Buy One?

At my open house this weekend, several people asked about finding bargains in today's market.
On the face of it, short sales, foreclosures and REOs may look like the same thing, but they are different. As pointed out in the Realty Times’ article entitled, Foreclosure Basics: Foreclosures, Short Sales and REOs, "if you enter the market wanting to ‘do foreclosures,’ without understanding the entire process, you could wind up in trouble.”
How common are these types of sales in today’s market?
While it depends on the market, short sales, foreclosures, and REOs are becoming commonplace in many markets throughout Northern California. What is an REO?
As the Realty Times article points out “If no-one bids high enough to meet the lender’s price at auction, the foreclosure completes and title transfers to the lender. Real Estate Owned means the property is owned by the lender.”
The article went on to point out that “Some investors see REO homes as the best way to buy property because there are no emotions involved: it's strictly business
between the investor, their agent, the lender, and its agent. And because most lenders aren't landlords (nor do they want to be), investors can often get a very reduced price.”