Bank owned homes (foreclosures, as they are more commonly known) are purchased "As Is". There is absolutely nothing the banks will guarantee about these homes. And in the Commonwealth of Virginia, banks are exempt from the Residental Property Disclosure Act. Yippee!!!
So you may wonder to yourself, why even bother to have a home inspection if you are buying a property "As Is." I will give you a first-hand account from real life experience.
My buyer (let's call her Mrs. Jones), is a first time home buyer. The Northern Virginia market is loaded with bank owned properties and Mrs. Jones knows that she will be accepting whichever home she chooses, in "As Is" condition. As we've toured home after home, Mrs. Jones finally found a house that had fresh paint, new carpet and all the appliances in the kitchen. Finding these three things in a bank owned home was easing the expense of her first home purchase.
At my urging, Mrs. Jones decided to include a home inspection contingency in her offer. In my words, "Even if the bank won't fix things that are wrong, at least you will truly know WHAT you are buying AS IS."
We sat on the fresh carpet as the home inspector went from room to room, Mrs. Jones decorating the home in 
her mind. Settlement is just days away and this is the home of her dreams.
Thirty minutes into the home inspection, the home inspectors voice beacons us to the basement. As the home inspectors generally do the inspection, write up the report, THEN talk to the buyer, this was unusual. Upon our entrance to the basement, our inspector (also a licensed, certified mold inspector/remediator) pointed to sn unfinished area of the basement. "There was a water event in the home and the basement has mold."
Turns out, the mold remediation previously attempted, was ineffective. My guess, it was done as cheaply as possible. The prior contractor had actually left mold infested drywall pieces in the unfinished part of the basement...and mold began to creep back up the walls. Estimated cost of this repair? $20,000. That's tearing down drywall, tearing up carpet and paid, remediating, replacing drywall, replacing carpet and pad, and repainting.
Mrs. Jones has asked the bank to place the required funds in an escrow account to be paid directly to the contractor(s) of her choice. This is a repair that must be done, for obvious health reasons, and she does not have the funds to cover it.
If the bank won't cover the expense, Mrs. Jones may likely choose a streamlined rehab loan, offered by her lender. That way, she can finance the repair into her loan. Either way, the house will be mold will be properly mediated and Mrs. Jones and her family will move into a mold-free home. If neither of these options work, Mrs. Jones has the option of voiding the contract and reciving her earnest money deposit back, and searching for another home.
Paying $250 for a home inspection just saved the health of Mrs. Jones family, and $20,000 in repair work that she would not have noticed on her own.
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