REOs are sold free and clear... or at least that is the bank's intention when putting the property on the market.If a title issue appears that prevents a transfer (these things do happen) the bank either remedies the problem before closing or, if the bank cannot perform, the buyer rightfully receives a refund of earnest money. 

Yes they have in-house handyman which seems like a bit of a conflict in interest.They have no incentive to prevent turnovers.The utilities- it’s not just water/sewer that is $437.  

Any strategy to prevent this kind of thing? 

I am not a fear monger but what happens if there is a cyber attack, or EMP that prevents us from accessing that money. 

(for both the sales floor and for employee areas, for purposes of loss prevention)  Does "smile, you're on camera" really mean "please sue me as I am exposing myself to liability" in the state of NJ?

Financial screening will prevent problems - even with kids

If they prevent you from making 1 big mistake, the few thousand bucks you pay them would be well worth it.Probably a good idea to pick up the BiggerPockets Rental Property Investing book.

Are there any laws preventing me from using that money to purchase a rental?

It is to prevent the buy and hold investor you see so much of in baltimore. 

I understand the logic behind why people just deduct them as overhead, but technical rules prevent doing so.