I just completed a quick keyword search within the MLS for listings that are labled with these terms.  What I found is no matter the neighborhood, you will find properties and distressed sellers.  I found a brick single family homes in North Center, condos along the lake front and three flats all over the City. 

Essentially REO and bank owned are exactly the same thing while a short sale and pre-foreclosure usually mean the same thing.  There is more risk for buyers with short sales as the negotiation happens first with the seller and then with lender who made the loan.  The important thing is to get educated on both types of sales before negotiating an offer.  The best way to receive this proper education is to use a real estate broker and attorney who have navigated these waters together before. 

It is no big secret that we are currently in a "big" slow down for our local real estate market.  Even in slows times, there still seem to be winners.  And what are those winners?  The winners are anything Greystone and lofts in historically strong buildings.  These two property types have continued to go contingent in the MLS even with all the doom and gloom media on local real estate. 

As potential home buyer, what does this tell you?  Well it probably tells you alot of things.  First, prices are not going in the wrong direction for these property types.  Second, you might lose out on a property if you are not committed to writing the offer.  Third, your resell prospects may be significantly greater if your are considering another property type.