Unless you are knowingly buying junker it is never a good idea to buy a car without a title. The problem is not not being able to get a replacement title, though that can be an issue... the real problem is that you don't really know what you have bought.
My DH worked in used cars for a long time. Cars without titles are often either stolen or have a bank lien on them. Nowadays many people finance even used cars and then go to sell the car without ever having paid off their loan ... it opens you up to the possibility of a whole bunch of legal stuff.
Another common possibility is that the car had been in an accident or other kind of damage (flood damage very common, there are still thousands of cars from Katrina on the "black market") and declared a total loss. You can get a "salvage title" for those cars, but because cars with salvage or junk titles are nearly impossible to sell for a reasonable price, some owners or dealers conveniently "loose" the title. Buying a junker can end you up with lots of technical issues and pricey repairs and it can be a safety issue, especially since you don't what the nature of the damage was and if key safety systems such as seatbelts have been replaced.
I hope it's just someone being flaky and nothing shady - but the fact that the seller had bought it without a title from someone else is a red flag. I would at least run a carfax on it and hope that if there was anything major with it, it was reported.