Each state will have its own specific laws to govern tax sales and the redemption rights that arise from a sale. I will not attempt to address the specific laws of your state but will try to provide what I think are the main principles that you will find are at play.
You will probably find that your "Quitclaim Deed" is nothing more than a conveyance by the State of whatever its interest is -- merely a claim for the taxes that were unpaid. It is not good title and no title insurance company is likely to insure the title.
Ordinarily, the people who lost the property to a tax sale will have a right to redeem the property by paying the back taxes plus some interest and perhaps some penalties. The most you are likely to recover from your purchase is the interest earned. Look at it as an investment. Where else could you earn that much interest in today's market? There may be others also who will have a right to redeem: such as the children of deceased owners, mortgage holders, the holders of judgment liens, etc. The time for redemption may or may not have expired.
In order to convert your tax deed into good title, you will probably have to occupy the property for a period of time set by your state without challenge by the prior owner (or others with a right to redeem), and then file an action in court seeking a Quiet Title Order -- that is, an order that declares you to be the owner. Very few holders of tax deeds are successful in getting this done. The cost will depend on whether you have opposition in court.
By "occupying" the property, I don't mean to suggest you have to physically sit on it. If it has a house, you can rent it. If it is vacant land, you can fence it, post it "no trespassing", visit it frequently, etc. The object is to create an obvious claim to it in the neighborhood. Your claim must be open and obvious, continuous, exclusive, etc. You should confer with a good real estate lawyer in your area to learn the specifics about your state's laws pertaining to the purchase of tax sale lands and what you can expect. A modest conference fee can dispel all these concerns.
Answered on Feb 15th, 2012 at 5:54 PM