Foreclosures, Bank-owned & REO properties are all one in the same. All are properties that have been foreclosed-on and currently owned by the lending institution/trustee of the lender. Foreclosed home's come in various property condition's, some are in great condition, some need a lot of work and everywhere in-between.
There are several different types of distressed property listings besides foreclosures;
One of the biggest differences between a foreclosure and a traditional sale is buyers don't receive the seller questionnaire nor the transfer disclosure statements on a foreclosure because the banks/trustees don't know the properties history. A professional home inspection is always recommended on any home purchase but especially on a foreclosure due to the lack of disclosure information.
A foreclosure purchase is thought of being the "better deal" when compared to a traditional purchase. A traditional sale even with a higher purchase price is a better deal 60+% of the time. Reason being, you must consider your time, repair/remodel costs, mortgage costs incurred during construction along with all the other fees/costs incurred when buying a foreclosure property and add them together to get the actual cost of the home. Most of the time, a traditional home purchase that is move-in ready will have a lower total cost to purchase/move-in price than a foreclosed home that needs "work".
Don't get me wrong, sometimes you can find a great deal on a foreclosure. However, with the number of foreclosed homes steadily decreasing month after month and the number of buyer's/investors staying the same or increasing only means foreclosed homes are at a premium due to the lack of inventory and the large number of people looking for them.