Maybe there was a reserve and they were looking for it?

Edit: it says reserve met so I am guessing that is what happened.

As for the saddle I have seen a lot worse. It looks like the surface has decayed somehow and come off. You could probably take a brass brush (i.e. for suede) to it and get a lot of it off (is this called tanning?) and then treat it with some proofide and ride it. It might be period correct for someone. The shape of the saddle looks good, not much sag or splaying so as long as there are no deep cracks it should still be very good functionally.