Once a property has been sold at a tax sale, that property suffers from a title defect. The former owner can file suit to recover his old property at any time, claiming that he did not receive proper service of process of the then pending tax sale. . . . Once a tax sale takes place, the only way to eliminate with certainty the resulting title defect is to file a quiet title action against the former owner (or have the former owner sign a deed in favor of the buyer). These curative actions are expensive and uncertain. It is impossible to determine how much such an action will cost because it is unknown whether the former owner will fight or whether the buyer can even find the former owner.
Occasionally I hear about settlement companies that tell buyers that such a property will be insurable "after one year." Details are sketchy because I have heard of this only second hand, but it appears as if some settlement companies have established an arbitrary one year period after which they will purport to insure a former tax sale property - regardless of whether the title defects have been resolved.
Keep in mind that the "one year period" has no legal significance. Title defects resulting from a tax sale do not go away after one year. If a buyer purchases a property under these conditions, the buyer will have difficulty selling the property, regardless of the fact that he used a corner-cutting settlement company to do an end run around the title defects.
Check here for future posts on the consequences of buying a property with title defects (with or without the blessing of a settlement company).
Update - click here to see some of the consequences of buying property with title defects.