Excellent question, Matt. Essentially what the bank is trying to say is that although they currently own the home, they have never lived in it nor do they have or know the full history of the home (i.e. past inspections, past damage and repairs, termite infestations & repairs, radon gas issues, water and mold issues, flood zone, etc.). When you buy a bank owned or foreclosure property, you are basically agreeing to purchase as-is, where-is, inclusive of any and all faults. Therefore, the resulting sale is made with limited disclosures.
Bottom line: make sure you perform your due diligence in all of the above areas. Get a professional home inspection and ask your inspector which tests and inspections he/she recommends for the area that you are purchasing a home in. Warm regards - Ted