I can help with your question. I am not a tax lien purchaser. I am a wholesaler and always have to deal with all types of issues that happen on the deed to include tax liens. And, I have paid and cleared titles myself so I do believe I am qualified to answer this question.
Most tax lien guys that are good, do their own title searches. You will not get title insurance. You can pay a title company to do the search for you. But if that is going to be your niche than you will want to save that cost and know what is on the title ahead of time.
You will have to clean the title up after you redeem the rights on the house. Basically, yes they quit claim it to you. But you will have to go to a judge to clean up the title if you ever wanted to sell the house for retail. Because they (your retail buyers) will want a warranty deed and title insurance. You will need to do a "suit to quit title" in order for this to happen. There are attorneys that specially do this as their own niche. They charge were I am at (Tennessee) around $2,500-$3,500 depending on whats going on with the title. You can get that reduced if you use them a lot.
This also takes about 3-6 months to clean up as well. Its a process with the courts and they do publications in the newpapers for like 4 weeks that you pay for (comes with that price tag above. So, some publications may cost more in some cities.) And than ultimately face a judge with all evidence and if all goes well... You have a clean title so you dont need insurance because a judge declared it guaranteed (Guarantee deed/Warranty deed).
This is why I personally dont do tax leins because its lengthy. I like quicker type transactions to keep the ball rolling but these issues arise all the time.
