Player 1 lands on two properties, but this auction does not occur.
This can easily be solved by simply saying "'no auction' house rule". Few people actually honor this rule anyhow. I don't object, I don't think it's a very good rule either. (Then again, I don't think it's a very good game, so my opinion may be suspect.) The biggest problem is the word "auction" is underspecified; it could mean many things and you'll spend more time arguing over it than playing if you try to take this seriously.
I have found it remarkable how few people play by the actual rules, and how few people realize they are not playing by the actual rules. Including some people who claim to hate the game because they are not following the rules. (Often this revolves around not using timers which the rules will often explicitly mention; my version of Scrabble does, for instance, though the online rules I find do not.)