Is it rational to get "spooked" out of deal by squatter?

[Richard McCloskey]

Planning to acquire my rental property that seems to only need minor renovations to the tune of 20k and have that feeling others have talked about that something isn't quite right. A neighbor told me and the realtor when we visited that someone walked out of the house in the morning and might be squatting there. So I came back at night and see phone or computer light brightly illuminating one part of the house. 

Realtor is also Listing agent and denied the occupancy at the time but looked like he was fibbing to me. 

Supposedly being sold "as is" and gas electric and water aren't even on, so no one should be occupying.  

So I am hesitating because my feeling is the seller is hiding a lot of problems. I have the prediction that if I go to contract and structural inspection those utilities won't all be turned on and it will just keep getting worse after that. 

Thinking of just dropping the idea of an offer but wondering what can be done to move forward and minimize risk ?