$\psi(x) = \frac{1}{\sqrt{1+x^2}}$ is a perfectly valid wavefunction. However, one cannot find the expected value of $\hat X$ in this state, because $\psi$ is not in the domain of the $\hat X$ operator.
The appropriate domain on which $\hat X$ is self-adjoint is
$$D_X:= \left\{\psi \in L^2(\mathbb R) \ \left| \ \int_\mathbb R |x \psi(x)|^2 dx < \infty\right\}\right.$$
For all $\psi \in D_X$, we then have that $(\hat X \psi) (x) = x\psi(x)$. However, since you can see pretty quickly that $\int_\mathbb R |x\psi(x)|^2 dx \rightarrow \infty$ for $\psi(x) = 1/\sqrt{1+x^2}$, this wavefunction is not in the domain of the position operator, which makes
$$\langle \hat X\rangle_\psi \equiv \frac{\langle \psi,\hat X \psi\rangle}{\langle\psi,\psi\rangle}$$
undefined. There's nothing particularly weird about this. What it means is as follows: if you measure the position of each of $N$ identically prepared systems and denote the average as $\overline X_N$, then as $N\rightarrow \infty$, $\overline X_N$ will not converge to a finite value. If you wait long enough, you'll measure arbitrarily large positions, and this will occur sufficiently regularly that the overall average is not bounded as the number of trials gets larger.
Another way to think of it is that, given any $M>0$, you will measure your overall ensemble average position to be greater than $M$ (or less than $-M$) with probability 1 as the number of measurements tends to infinity.