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Well first of all because they don't know for sure & certain that it will sell at auction......and secondly, because that's what the law says they're entitled to do. In future, if you don't want to put your 0.25% deposit at risk, then do your P&B before you make the offer and get it...

Yes, it was off the market. If someone else wanted to buy it in those 5 days that you had control, they could not have. Yes, it was not marked on the internet as "under contract" and yes, they were still showing the property, but that does not mean anyone else could have purchased it. They do...

Agent must disclose once he/she knows, as it is a Material Fact. Impossible ask, although I understand the sentiment. Who decides the size of the problem? Some people would want to pull out, others would cover it in a lower offer and fix themselves when renovating. You do your own DD - P&B...

It isn't. The purchaser pays his 0.25% for which he/she gets total control of the property for the next 5 business days. Vendor can't sell to someone else, or for more money, or refuse to sell. Vendor gets it.