Accepted Offer, but Bank doesn't have clear title.

[Ed B.]

I have an accepted offer on a REO, but now the bank is claiming they can't sell because they don't have clear title--yet they foreclosed, and supposedly during the process received the title. They offered to refund my earnest money, but I'm reluctant to walk away so easily, since the profit in this was about $40-50k. I don't know exactly what's preventing the bank from getting clear title, but it may be fixable. Wondering if anyone has experience with this, and what you did to solve it? Or maybe it is better to just walk away? Yes, it has occurred to me that the bank may be "fabricating" a phony title problem so they can try to resell it for a higher price.