@Eric Miller, first off if you are asking this question you NEED a real estate agent. There are likely many more things an agent can help you with many of which you would not even think to ask.
A few things about your question:
1. Just because a seller (in this case a bank) does not wish to warranty the title doesn't mean the title is not "clear".
2. In most states the sales contracts used by realtors will by default make the contract contingent upon the seller providing "clear and marketable" title. This generally means that you can get title insurance on it yourself when you purchase it.
3. In many places (including my state PA), the sales contract used by realtors will specify the type of deed/title warranty the seller will provide. The typical default is a "special warranty deed" meaning they are only guaranteeing the title for issues that came into existence during their ownership.
Since the bank likely owned the property for only a VERY short period of time, that kind of warranty would not provide you with much protection at all anyways.
A "general warranty" deed would guarantee the title against any issues that came to exist at any time but those are not often used.
It sounds like you will receive a "quit claim" deed or similar where they simply transfer whatever interest in the property they have with no guarantees.
4. You asked what can cause a property like this to have a title issue. The foreclosure process can be messy and complicated. So, errors can occur. The type of error may depend on the state and the mechanism the use for foreclosures. In the east, lien theory states we use a judicial foreclosure and in most western states they use a title theory non-judicial foreclosure process.
In my state (PA) which is a lien theory state perhaps an interested party to the foreclosure is not served property with the notice about the foreclosure. Maybe its an estate and they don't notify the heir(s), administrator, or executor at the correct address. Errors in the process as small as that create a "cloud" aka uncertainty on the title because one of those parties could show up later on and contest the foreclosure as improper because of their lack of property notification.
That is just an example of the kind of issue that may exist. MANY MANY other types of issues might exist having nothing to do with the foreclosure process.
5. Generally speaking, it would not be uncommon for a lender to sell a property without warrantying the title and that you as the buyer would buy your own title insurance as part of the closing and that the insurability of the title would be a contingency in the sales contract.
