Short answer: Bank forces sale of defaulting owner property. Often cheaper but risky. May have damage or tenants. Buy as-is.
A mortgagee sale happens when the owner cannot pay the mortgage and the bank forces a sale. They are often cheaper but come with risks. The previous owner might damage the property. Tenants might still be there. You cannot inspect as thoroughly. You buy as-is. Get a very thorough inspection and legal advice.
Market Value: $600,000
Mortgagee Sale: $520,000
Risk: Tenant refuses to leave, $5,000 legal costs
Outcome: Still $75,000 ahead but stressful