If you do not have a binding contract, I would not invest in any inspections until such time that you know you are solid. The only reason to turn the water on is for inspections, but why would you want to do inspections without first knowing you have a deal?
If the property is such a good deal, and you must do the inspections to secure it, then you need to make a decison whether the investment in inspector fees is worth it. If you can delay the inspections without losing the property, take that route. Don't invest or risk unless tyou must and then, only if he potential reward is worthy.
Minimize your liability by asking the listing agent for the proeprty to arrange turning on and off the water. Again, if they decline, you might have to make a risk/reward decision. In most cases, the listing agent can do this. There are a lot of REO properties in many markets and if the banks want to sell the properties they are holding, they need to realize that they are competing with a lot of inventory out there....both REO and not.
You may have to incur a fee to do so but that is one of the aspects that come with buying a bank owned property. The Bank may also require you to re-winterize it after the inspection and charge yet another fee to do so - again, my recommendation is for the Seller to handle the process so that the Seller controls how it is completed.
Bank owned properties sometimes are a good deal but the process may involve a few more steps and or a few more fees. Good luck and hopefully there will be no issues.
In my humble opinion it would be the responsibility of the bank or Realtor to winterize the home unless you have a binding contract (signed by bank). Our purchase contracts state it is the seller's responsilility to maintian and keep the utilities on so the buyer can have their inspections. What stage are you in negotiating with the bank?