Never thought this would happen!!! Sign of Times

I locked up an REO purchase about 60 days ago or so and was pretty happy with the deal as it is a solid house that needs 8k of work and then would rent for nice cash flow. 

 The wrinkle or surprise came when the seller (the bank) went to the city to get the demands so we can close and move on.  

 Turns out the fines have been building for over a year and are now GREATER than my purchase price.  So not only is the bank going to get ZERO dollars at closing they are actually going to spend some money to get me the house.  

Needless to say the bank is balking at selling at agreed upon price.  They had the nerve to ask if I would raise my price.  I told them no thanks and suggested they go to the City and fight some of the fines because I have a contract and would like to close as agreed.

Not sure how this will play out but I did find it very odd that I could buy a house for less than the total fines.

Anyone else see this happen? What did you do to get passed it?