Houses go up for auction for several reasons, but here are the main ones:
1 - Bank foreclosure. The bank wants it off their books and doesn't want to go through the process, and time, of listing it on the market. So, they put it up for auction. These happen all the time on courthouse steps. They are interesting to watch, if you ever have an opportunity to go to one. However, if the house doesn't sell at auction, then the bank takes it back and eventually lists it for sale.
2 - Estate sale. The owner is deceased and the executor has been directed to dispose of the property as quickly as possible to cover costs of the remaining debts. This usually has a reserve price that must be met before the house sells. If it isn't met, then it will go on the market.
3 - Tax lien. The owner has not paid their taxes in many years and the city has taken possession of it and puts it up for auction to recoup the taxes owed on it. Usually in this case, it goes to the highest bidder, no matter the price.
Hope this helps!
RealtorÂ® in DC, MD and VA
Keller Williams McLean-Great Falls