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I still believe it's based on seeding. Years ago, schools had to bid for NIT home games as they progressed through the bracket. The NIT also didn't publish brackets back then either. If you won, you had no idea who your next opponent was until it was announced prior to the next game. That was also before the NCAA took over the NIT.
In the 2022 NIT, Virginia was the implied 6 seed and St Bonaventure was the implied 5 seed - yet when they met in the quarterfinals, Virginia was the host. So I think the unseeded teams truly are, well, unseeded.