Reo are properties that have been forclosed on and are now bank owned properties. If you are looking for reos in your area you can find them on a service like realtytrac or go to the courthouse and dig them up yourself.
-Dont expect really leage discounts on reos.
Contrary to popular belief, bank do try to make money off of their properties. Their pries can be less than market vaule, but some banks even have realtor that work for them to sell their reos.

There are certain things that can give you a leg up when you are dealing with an reo.

If the property has a maintenance problem, or will cost them to maintain it. they will want to get rid of it quicker.

If the owner wont move out.

If the previous owner damages the property.

If any of these conditions is met you can definately get a better deal on an reo.