They get a certain time frame between taking the tickets and the cut off point before they can give them back to City to sell, usually a club will wait right up to this deadline before returning certain blocks so they have a better understanding of demand - apparently Watford didn't consider this, and sold seats in all 3 tiers across all blocks, willy nilly, which scuppered any chance of them being returned.
-I'm basing this on information that's probably been provided last week though so fingers crossed it will be full in their end. It would be very annoying if we missed out on the stadium record because they didn't sell out! :P