I understand your frustration, I had a client that offered cash for a home & we were all set to close when the same thing happened. I was ready to get the deposit back & move on. What their lawyer suggested was to look for another home while waiting for the auction so they will have a back up if they lose at the auction. He said there were 3 possibilities: 1) they could get it for cheaper than the P & S they had, at the auction, 2) someone could offer more than what they had a contract for - meaning the bank would sell to higher offer, 3) the bank could buy it back for higher than the price agreed upon - if this happens the lawyer said that the bank must honor the original P&S. It would seem that the only chance of losing is if someone bids higher than what your offer was at the auction. So, if you still want the house, consult your lawyer & see if this senario would be true for you. Just have a back up plan, in case it doesn't work out.
Hope this helps.