QB Issue Resolution:

I would create an expense account called something like, property bad debt.  Create a credit memo for the unpaid invoice and fees that posts to that account and apply it to the unpaid invoice

All costs to have the auction, as well as the auction income I would post to that same property bad debt account.

When it is over, report on the property bad debt account, if the account has a credit balance that amount is excess and is to be donated, write the check and use that property bad debt account as the expense for the check to the school system.

End result the account should be zero balance.

Resolution for Issue 'Customer property was sold at auction because of failure to pay. New owner’s payment needs to be applied to former owner’s overdue balance. How do I record?' available: Yes (Solved).
Source: Intuit Community forum.

Customer property was sold at auction because of failure to pay. New owner’s payment needs to be applied to former owner’s overdue balance. How do I record?: this issue or error code is a known issue in Quickbooks Online (QBO) and/or Quickbooks. Support for this issue is available either by self-service or paid support options. Experts are available to resolve your Quickbooks issue to ensure minimal downtime and continue running your business. First try to resolve the issue yourself by looking for a resolution described below. If it is a complex issue or you are unable to solve the issue, you may contact us by clicking here or by using other support options.

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