A short sale occurs when the lender agrees to take less than the full loan payoff of an owner’s property. The homeowner is most likely behind on payments and owing more than the home is worth. Keep in mind that the term “short” sale can be misleading. A short sale can take some time to complete, usually due to banks or mortgage lenders long approval process.
Foreclosure is where the bank takes possession of the property because of non-payment for a long period of time or an unapproved short sale.
A REO is a bank-owned property (“real-estate owned”), when homes go into foreclosure they are sold at an auction, if no one purchases it at the auction, they become REO properties. Later they are usually listed by Realtors hired by the bank, often at a reduced sales price (anywhere from 20 to 50% less).