I was recently contacted for an answer to this question and found the answer to be one that I was not aware of. The answer was graciously provided to me by a Senior Title Officer with Chicago Title.
Q. Is there a restriction in the state of California that prevents a buyer who purchased a home through a property tax auction from transferring title during the first year following the auction? In other words, if an investor or buyer purchases a property through a property tax lien sale or auction, is he restricted from reselling that property for a period of time because he cannot obtain title insurance when it transfers it to a subsequent buyer?
A. The buyer at tax auction can re-sell the property within a year however they may have trouble obtaining title insurance. Title companies typically will not insure until one year has passed due to the fact that there is a one year right of redemption if a junior lien holder or former owner was not properly notified of the tax sale. After a year the title company requires a letter from the Tax Collector showing proof of all notifications sent, this is reviewed before insurance can be issued.