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17 MARKET FORECAST CALLS FOR POSSIBLE JUMP IN FORECLOSURE AUCTION VOLUME A case study of two nationwide cohorts of properties brought to foreclosure in Q4 2022 reveals that proactive pricing is key to optimal distress disposition during a housing slowdown, according to Auction.com's 2023 Distressed Mar- ket Outlook. Pricing in the proactive pricing cohort was reduced by 11% between September 2022 and December 2022, while pricing in the status quo pricing cohort came down just 1% during the same period. "With home prices now down more than 9% from their May 2022 peak and forecast to fall further in many markets, sellers who price proactively will minimize the risk of taking on properties that are losing value every day," said Ali Haralson, President, Auction.com. Key Findings: • Bidder behavior at foreclosure auction pre- dicting retail home price declines in 40% of largest U.S. markets in early 2023. • Forecast calls for possible 24% increase in foreclosure auction volume in 2023, still close to half of 2019 volume. • Case study of foreclosure auction pricing strategies employed in Q4 2022 shows immediate lift from proactive pricing. • Foreclosure auction sales outperformed traditional REO sales by 40 points in 2022 in terms of estimated net proceeds. • Foreclosure auction sales result in retail homeownership rates that are 14 points higher than traditional REO sales. • ird-party homebuyers at foreclosure and REO auction renovate properties to 99 percent of "after-repair" value on average. e report also shows demand for distressed properties shifting lower in the last three quarters of 2022 as buyers at foreclosure auction and REO auction anticipated the downshift in the retail housing market and began bidding more conser- vatively. Bidding behavior at auction acts as a re- liable predictor of future price appreciation in the retail market, and this bidding behavior points to falling home prices in 40% of the nation's largest metro areas in early 2023. e report includes results from an analysis of lender pricing strategies at foreclosure auction in Q4 2022 in response to the shifting distressed property demand and slowing retail housing market. Lenders who adopted a more proactive pricing strategy saw a net gain of 40 points in sales rate when compared to lenders who stayed with a more status quo pricing strategy. e proactive pricing strategy came with a net loss of 2 points in price execution when compared to the status quo pricing strategy. "e distressed market was infused with some of the same exuberance that dominated the retail housing market in 2021 and early 2022, but distressed property buyers quickly returned to more sustainable bidding strategies as the market slowed in response to spiking mortgage rates," said Jason Allnutt, CEO, Auction.com. "Sellers most nimble in this volatile market will produce the best and most responsible distressed disposi- tion outcomes in 2023." Read the report to learn more about these case study questions: • Will foreclosure volume continue its grad- ual post-moratorium rise? • What is bidding behavior saying about 2023? • How much did foreclosure auction sales outperform traditional REO sales in 2022? • What are the retail homeownership rates of foreclosure auction sales and traditional REO sales? • How much value is being added by third-party buyers during renovations? Journal

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