What's the difference between a Foreclosure, Short Sale and REO?

Foreclosure : where the bank takes possession of the property because of non-payment for a long period of time or an unapproved short sale.

 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.

REO (“real-estate owned”) also known as bank-owned property: when homes go into foreclosure they are sold at a trustee sale, if no one purchases it at the trustee sale, they become REO properties. Later they are often listed by Realtors hired by the bank.