Russell Lodge in Gorleston, which closed last year, caught fire on Tuesday night.
The building in Lowestoft Road was due to go under the hammer at Dunston Hall near Norwich on Thursday, with a listed guide price of Â£250,000.
Norfolk Police said it was investigating the fire as potentially suspicious.
The care home shut after the Care Quality Commission found it was not meeting four out of five standards.
Nearby residents were alerted to the flames when they heard firefighters smashing through a cast iron cover to get to a hydrant.
Gordon Hargreaves, who lives across the road from the property, said he was "panicking" about the next-door neighbours' "wooden-framed house".
A former care home in Norfolk which was due to be auctioned has been severely damaged in a blaze.