Bank owned homes, Foreclosures, REO (Real Estate Owned) homes are all one in the same. A home buyer has defaulted on there mortgage payments and the bank under went the foreclosure process and took ownership of the home. REO homes come in all shapes, sizes and condition. You can spend a lot of time looking at REO homes because you will find that a lot of them don't qualify for financing due to their condition. They are worth looking at though because sometimes you find one that works or if your financing allows some wiggle room for repairs, like Conventional loans and, 203k rehab loans.
All banks have a different set of rules that the buyer is going to have to follow to purchase a home from them, and most of the time its their way or the highway. This is because the figure they will find someone else that will play by their rules and they aren't in any big hurry. You can bet that inspection periods are shorter and they will only fix items that are required by the lender to acquire the financing. If repairs are needed they usually will want to see the appraised price before they agree to fix things, and then raise the price dollar for dollar for the repairs.