You have a couple of options. Both will require you to pay the taxes. You can open probate on your grandfather's estate, become the representative for the estate and then evict the squatters. This may be complicated since your grandfather died years ago.
If you do not know what probate is, then you are going to need an attorney. Yes, someone could outbid you on the auction but probate would also cost money and you are going to have to pay the taxes, either way.
And if you win, you will have to present payment within a day or two. Are you prepared for that? Do you have the cash to buy the house? Do you have a financing guarantee from a lender?
Then I would bid on the house at auction and try to get it for not much more than the taxes. Or get an idea of how much an estate attorney and probate would cost and add that to the amount you are willing to bid on the house. Its going to give you much clearer ownership of the house that way.
If you pay the taxes before the tax auction there won't be any auction and you'll have given a gift to the squatters who will cheerfully remain in residence until you probate you grandfather's estate.
Then understand that there will be investors at the auction who will be looking for a bargain in perfect condition and you might end up in a bidding war with professionals who know when to quit bidding and leave you with the win at a price you didn't prepare for. I suggest you figure out what the current market value of the house is and put a dollar limit on how much you want to pay. Investors will want to get it for 60% to 70% of market value so they can flip it and make a profit.
Your only option at that point would be to open probate. If you are not the only potential heir to the estate going through probate would get the house divided between the legitimate heirs.
Even if you are the only potential heir you would still have to open probate and have the court authorize you to represent your grandfather's estate.