Someone else asked a similar question, and I repeated my answer below, but added the following:
"I'll expand a bit on that now that I'm not using my phone to answer.
Between 2008 and 2012 REOs were usually priced well. Then our market improved, and the banks noticed. As with any type of situation you can still find some well priced REOs, but it's harder. And I'm not just talking about the list price. You need to remember that with an REO the terms to the buyer are not as good. I addressed some of those issues here: http://www.trulia.com/blog/kary_l_krismer/2011/12/buying_an_…
Finally, in the Seattle area there simply are not that many REOs. You'd be really limiting yourself if that's all you're looking at."