We are in the middle of exactly the same situation. First time buyers going for a REO. My biggest advice is to have patience. Second is to read all you can, about everything in the process.
Find a easy to deal with Realtor that you trust. Ours works in a 'team' enviroment and in our case it seemed to work out well. I enjoyed the differing points of view and the ability of another team member to offer up an opinion when our Realtor 'wasn't sure'.
Treat an REO just like any other property. Don't assume the price is good just because 'it's an REO'. Do your own research on comparable property prices and balance that with your Realtors assesments. When negotiating, don't be afraid to ask for some things that you might ask of an actual 'owner/seller'. Banks have the exact same goals as real people. The best price and a fast sale. They will make the same concessions as 'real owners' to make a deal. It seems, from many posts in many places, that as far as REOs are concerned a 'clean contract' is sometimes worth more to a bank than the price. Espcially contingencies. Banks want to make sure they are not wasting thier time and once they enter into a contract that want it to close. If your a renter, don't have a home to sell first and have good credit for easy hassle free financing your probably golden.
As far as research goes...I feel it helped me considerably. I pretty much spent every night for 4 months browsing the internet for info. Listings, mortgages, escrow, FHA, recently solds, etc, etc. I even googled up the listing realtors to see if I could glean any information. I feel it paid off. We got somethings even our Realtor was suprised at. Money for repairs on an 'as-is', for example. I can't say if was my newfound info or simply todays market conditions that helped us get into our home. But, everything certainly helped.