I am sorry to hear about the problems you are experiencing with your purchase. Unfortunately, the seller (bank) has not done anything wrong according to the law. There is likely a clause in your bank addendum that states they have the right to cancel the contract if a title problem is too bad and they have so many days to resolve the issue. (the just of what it would say, not exact words)
Good luck. Foreclosure title work can sometimes be a long process because the amount of liens that are typically on a property that has been foreclosured on. (property taxes, home owners assoc. dues, mechanics liens for work done, etc.) These items sometimes come up after ownership reverts back to the lender.
Regarding your contract questions-your agent should have spelled out a timeline for response in your offer. If that time has passed, you are correct in thinking you do not have a valid contract right now. (doesnt mean alot since banks seem to always ignore timelines) If there are major title issues, they will not be able to sell to anyone else right now either, so you are likely okay.
It is a waiting game. My best advice is to be persistent. Bug the title company and your agent often.... more