REO in NJ, $11k deposit held by sellers atty, and TITLE PROBLEMS

[Jake Recz]

Hello everybody, I posted here before about the property I was working on. The closing was supposed to be on Aug 3rd, 2015. As usual with REO's, that day came and went. We were waiting for the indemnity agreement and another document to be obtained by the seller. That took a month extra. I'm buying the property from Wells Fargo.

The sellers attorneys have $11,000 of my deposit on a purchase price of $46,000. Per the contract the sellers are to provide a "Bargain and Sale CVG (type of deed). Title of the property will be free from all claims or rights of others, except as described in sections 6,7, and 8 of this agreement". Section 6 is tenants- does not apply. Section 8 is building and zoning- all good, does not apply. Section 7 says:
"... Title to the property shall be good, marketable and insurable, at regular rates, by any title insurance company licensed to do business in the State of New jersey, subject only to the claims and rights described in this section and section 6 ..." It goes on to say that seller shall have 30 days to fix title if if the title shall contain any exceptions etc. or I can break the contract and get my deposit back (I think. I don't exactly trust wells fargo!)

Now that you know what the contract says, here is the problem. My attorney called today saying that judgments came up during the title search. $280,000 worth of judgements... I obtained title insurance but that only covers me up to the purchase price which is $46,000. So the remaining amount of judgements is not covered by title insurance. Wells Fargo wants to close BUT a title with judgements is NOT a clear title like they promised to deliver  in the first place (first paragraph above)!! What the hell do I do now? 

They are tough to work with, unwilling to change anything, they want to sell me a property with judgements and act like if everything was ok? My attorney said I might get myself into a position where I buy the house, fix it up, and a company that has a judgement against it may show up and take it to cover the judgement... I would be stuck with, no money, and no house. My attorney says its a huge risk and I can clearly see that. I'm also afraid I will lose my $11k deposit on a technicality if I back out now. Not to mention this is a very sweet deal... Have you ever dealt with anything like that? What would you do?

P.S. To anybody with a similar issue, I read a little bit on the forums and I see people asking if they should get their own title search done. YES. If I used WF title company to do the search I can bet you my right arm that their search would NOT advise me of the issues with the title that exist!