I am pretty familiar with what ends up at auction and the local rescues. Indeed, my horse was bought at auction by my coach . . . as an unhandled 2 year old that was too much for the owners. She is a stock horse and a nice enough example of her type, but she also almost killed my coach in a pasture accident in the first year.
The quarterhorse industry overproduces on purpose, and in some regions you can indeed buy at auction or via “rescues” nice enough sound, unbroke young 2 and 3 year olds that have been culled.
The Warmblood industry does not work like this and there is a price premium, current fashion, and question of limited supply. This means that a nice or even niceish WB will sell for far more than the equivalent QH, Paint, Appaloosa, or indeed Arab, TB, or STB. Indeed a goofy clunky doofus of a backyard bred WB will sell for more than a truly lovely and completely sound TB.
Anyone who had a young sound sane registered Oldenburg, even unfit and greenbroke, could list it on CL or FB tomorrow for between $5000 and $10,000 and get a buyer within a week, because all the young trainers know they can put a couple months training on that horse, fatten him up, and sell him for $40,000 to one of their clients.
The owners would not be sending it to a kill auction for meat price of $500 because you could get so much more by a private sale.
Auctions are indeed the sale of last resort for almost all sellers, because the meat price is so low, and indeed just appearing at the auction lowers the horse’s value. I can’t imagine folks bidding a horse up to $5000 at that kind of auction because they would be in doubt as to its health and rideability.
The thing about auctions is that there is no PPE, often no chance to ride, no guarantees, no trial period, and often the registration papers “get lost in transit.” In other words, all the problems that you report with your horse and your young friend’s horse, multiplied.
And OP I have not been the person to announce that your horse is “unsound” whatever that means by now in this thread. You have posted multiple posts worrying about her roached back, her funky front foot, your problems going forward at the canter, and about your young friend’s horse that you describe as broken down. You have said that your horse is not fit to jump anymore, or not jump above a certain height, or something like that; forgive me if I’ve lost nuances or retractions or denials in these lengthy replies. You are having the vet out yet again to look at her and get to the bottom of her problems. You are the one saying there is something NQR about the horse and that you have had to change your riding goals to accomodate your horse’s limitations. You are the one saying that you bought a horse that couldn’t do the work you hoped to accomplish with it. I am simply responding to what you are saying.
We aren’t looking at a happy rider/horse combos sailing over 3 foot fences and saying there’s a hidden problem.
Anyhow, as I’ve said before, I hang out at the low end of nice horse, and I have yet to hear of anyone picking up a quality WB at auction. If they were getting them, I’d know: I"m in exactly the part of the horse market that knows a good horse, but needs a good bargain! 
Also a lot of the stories about “great auction finds” like Snowman come from a place and a time when auction was a way of trading off perfectly functional horses. Before classified ads and certainly before the internet, the auction was the only real way to get buyers and sellers together. Lots of useful horses used to go to auction and to get bought up by people who wanted to use them.
These days FB and CL and other online venues do the job of matching the sellers and the buyers of almost all horse that have resale value, and indeed a number that don’t. These sites act like auctions to set a market price if the sellers lower their prices over time if the horses don’t sell, or indeed if two buyers want the same horse and there is a bidding war.
The actual general auctions are therefore the place that horses no one wants to buy end up, or horses being culled.
There are sadly an awful lot of horses that are on the spectrum of NQR to badly lame, or not broke, or have behavior problems, and those are the ones that go to auction.
I thought DWB would be a good bargain buy, not sure I’m wrong but I wasn’t expecting what I saw unloaded off the trailer. Given the headache that is my rehab horse I would have turned this one down if I had serious 4* dreams. Super sweet, super cute little boy, really immature and only wants loves and hugs. Owner originally told me she wanted a 4* horse, but I think everyone’s sort of realizing that those are rare gems… If the hunter’s bump won’t effect his X-C ability then maybe there is hope! I sure hope so, because he is such a lovely guy. I suspect HB came from aggressive dressage training, just knowing what I know about trainer.
