This scenario depicted actually happened at the height of the GFC in Australia. Many punters who had margin loans called in or overextended themselves with no fall back position had to sell.
Unlike the US our banking system was not on the verge of collapse and all mortgagee sales were managed by the banks. An agent who lived in the area would be given the property , very little advertising bar to say there was an auction , bargains to be had but contained. Those properties worked their way through the system and you are non the wiser.
Therefore the belief that a desperate seller will undermine prices presupposes that other vested interests are lame , blind or stupid , which just is not the case. The Gold Coast is one of the few areas where it could not be contained.
