We had to drop the rent a couple times just to get renters in there for below-market rent.  

Not enough interest = wrong price point, try dropping by $50 every couple of weeks until you get enough interest that you have good tenants to pick from.Lots of viewings but no applicants wanting to rent = problem with the property.

It is a local bank owned property, but its been a year and the listing price only dropped $500.

I haven't seen the banks do a single step drop that far but you never know...

In order to drop the rate lower, you pay X amount in points. 

The home inspection will come with some other small things that need to be looked at.Check all the water heating and HVAC, and water pressure in the building.see if you can locate the pressure regulator if you cant it could cost you $350 to find each and replace it.

Foreclosure proceedings start.Figuring out how you are going to handle your 5 year  balloon should be done day 1 after closing. also many commercial loans will have covenants that require addition of equity if values drop.. also capital requirements for the owners..  

If its city water/sewer the only utility risk is who owns the pipes.

Why buy a 200K house and keep it long term, so by the time its paid off its worth nothing because there is no water left?

The buyers home inspection found there was a leak and some water intrusion and that some drywall needed to be replaced.