I am not sure which state you are. It sounds your state is lien theory state. That means you have the house, but the bank will put a lien to use your house as a collateral, and the bank can foreclosure your house if you were default.
When a house got foreclosure, it is going to be auctioned, then the sold money will be used to pay off the bank’s loan but the buyer will have the responsibility to any higher liens unpaid. That is why it is risky to buy house in auction
If the auction failed, normally, the bank requested the foreclosure will pay off other bank’s loans, and put the house in bank’s name, and then sell it on Market, that is normally called REO house.
No matter the buyer got the house from the auction or from the bank’s REO, it really has nothing to do with you if you provide true document to the bank. In fact, any house buyer should have title insurance to cover any title damage . You might need understand why that guy purchased the house, then the house is backed to the bank again.
I guess your house was foreclosure by second lien bank. That normally means low auction bid, but the buyer has to pay off the first lien, that will be a big amount. If that is the situation here, it is really not your responsibility but the buyer had to do title research before bidding the house in the auction.
So you should not worry too much, but you might need an real estate attorny to help you.
