If someone doesn't have enough money to pay the mortgage, do you think they have the cash to do regular maintainance & repairs (like termite treatment)?
Be extra careful in your inspections when dealing with a REO, goverment repo, auctioned or short sale property. If you buy as-is, prepare for the worst. I bought a VA repo, as-is, no home inspection. The day we turned on utilities, the hot water heater burst. The gas-pack ran for two days and died. Verdict: not repairable. That was ok, because I bought it for half market vakue, but just know what you are getting into and have the resources to back it up.