Real Estate Lawyer - Title Question

[Drew Nagda]

We currently have a house under contract with a motivated seller. I added a clause saying we will purchase the house contingent on a marketable title. However, the title was transferred to a family friend to avoid a $5000 lien about 7 years ago. Problem: the owner hasn't been able to track that individual down in 5+ years. The owner has been making all the payments on the loan (insured with the bank), and there's a more than 60% to pay on the loan still. 

We spoke to the bank and we are able to assume the loan. We plan on using this house as a rental, so have a flexibility on time to get the title straightened. The homeowner's main worry is to be able to pay the next 2 mortgage payments before he moves out of the country. I also wrote that I would give him a $5000 earnest money deposit 1 week from the contract signing date to be used towards those payments. 

Has anyone dealt with something similar / is it worth pursuing with the courts and lawyer? 

Numbers: Purchase @ $290k

Repairs: $25k 

ARV: $400k

Would this be a situation where I could use a quiet deed transfer? Any help would be appreciated!