REO stands for “real estate owned,” and it refers to homes that lenders, such as banks, have taken back through foreclosure. The presence of a host of REOs sug¬gests that owner/borrowers have neither had the means nor the will to keep their properties when times got tough. The more REOs in the market, generally speaking, the weaker it is. On the other hand, “working the REOs” can be a good opportunity for investors. It is sometimes possible to buy an REO for under market (usually if it’s in bad shape), fix it up, and then quickly resell—a kind of flipping. This will work in all but the worst market conditions. Finding good REOs, however, often means having a contact in a bank. You should check with your local bank to see if it has any REOs in the area. (Most banks farm their REOs out to local agents.)