You will want to sign a short term lease agreement and get proper deposits for them such as last month and security.

The damages exceed their security deposit.

One of the "devilish" investors I once worked with actually devised 2-step bidding strategy involving 1st win by OO, then deliberate release BOM with loss of escrow deposit, at which time it would fall right into the lap of the investor who would submit a bid the NIGHT BEFORE status in MLS changes to BOM.

Depending on the auction terms it could be that result plus the forfeiture of your deposit, or perhaps the trustee/auction company must elect one remedy vs. the other.

What was the amount of earnest money deposit?

pays $112 deposit)From what I understand, as the new owner of the property, I'm pretty much on the hook for non-payment of the water bill no matter which form I submit.

Would someone be able to fill me on in what is required with regard to bank accounts in the state of NC for holding a tenant's security deposit? 

Handling Maintenance requests and emergencies, Handling tenant disputes, Ensuring the tenants are properly insured (if you require them to), Marketing the property, Screening applicants, Handling the security deposit return, and a whole lot more. 

if you can hang in there, things quiet down and the only thing you are doing is depositing the checks. that's the fun time. :)at the end of the day, tenants just want to be left alone and make sure you are taking care of the needed repair requests.

Ideally, a location near a hospital or other attractive amenities is ideal.The upfront investment you would need is the Security deposit and 1st months rent, and cash to furnish the unit.