A kick-out is a loan the buyer removes from a trade after reviewing the file. For a seller it is frustrating: the loan was priced, the trade was planned and now one piece is missing. Most kick-outs are not surprises, though. They come from a short list of standards that a buyer applies to every file. If you know the list, you can check your loans against it before you sell.
This article covers the standards CorrFirst applies in diligence and why each one matters.
Why a bid can change at all
A bid is based on what your tape or seller portal registration shows. After you accept, you deliver the loan file, and diligence confirms that the file supports what was represented. At CorrFirst, our bid holds through the commitment period unless diligence finds a material defect. Our AI underwriting reviews the entire file on every loan and our underwriters clear it, so when something is found, it is found before purchase rather than surfacing later as a repurchase request. The standards below are the material defects we see most often.
Appraisal sourcing
The appraisal is the foundation of the loan's value, so how it was ordered matters as much as what it says.
- It must come through an AMC. Appraisals need to be ordered through an appraisal management company, which keeps the appraiser independent of the lender and the borrower. An appraisal ordered directly by the borrower or broker is a common kick-out.
- It must use a local appraiser. A local appraiser knows the market, the comparables and the neighborhoods. An appraiser working far outside their area is more likely to miss what drives value.
- For small-balance commercial, national appraisal firms are not eligible. On SBC loans we need an appraisal from a local appraiser, not a national firm.
Every unit inspected
On a multi-unit property, every unit must be inspected. An appraisal that inspected some units and assumed the rest are similar leaves the buyer guessing about the condition of the collateral. On a property where the business plan depends on renovating or leasing units, the uninspected ones are often exactly where the risk sits.
Environmental reports
Environmental risk can make a property hard to sell or finance, regardless of its condition. Our standard depends on the loan amount:
- Up to $3M loan amount, an environmental records search (RSRA) is acceptable.
- Above $3M, a Phase I environmental site assessment is required.
A loan above that threshold with only a records search on file will not clear diligence until the right report is in place.
Subordinate financing
CorrFirst does not buy loans with subordinate financing on the property. A second lien complicates any workout or foreclosure and can change the borrower's incentives. If a junior lien was recorded after closing, or was part of the original capital stack, the loan will not fit.
Check title before you sell, not just the title policy issued at closing. A lien recorded later will not appear on the original policy.
DSCR valuation
For DSCR loans, we value the property using the lower of the income approach and the sales comparison approach. If the loan was sized on the higher of the two, the leverage looks different once it is recalculated on the lower value, and the loan may fall outside what we can buy. Look at both approaches in the appraisal before you put a DSCR loan on a tape.
Property type
Some kick-outs come from the collateral itself. Our small-balance commercial program covers multifamily up to 25 units and mixed-use up to 10 units with at least 50.01% residential. We do not buy pure commercial property: no retail, office, industrial or warehouse. A mixed-use building that is mostly commercial by square footage will not qualify even if it has apartments upstairs.
Documentation gaps
Beyond the specific standards, many kick-outs come from ordinary gaps:
- A tape that does not match the loan documents.
- Missing executed documents or unsigned pages.
- Insurance that lapsed or names the wrong loss payee.
- Draws funded without inspection reports on rehab and construction loans.
- Loan conditions marked cleared with no evidence in the file.
These are usually fixable, which is why it pays to find them first.
How to avoid kick-outs
- Order every appraisal through an AMC with a local appraiser, and confirm every unit was inspected.
- Match the environmental report to the loan amount.
- Pull current title before selling to confirm there is no junior lien.
- On DSCR loans, check both valuation approaches.
- Build the tape from the documents, and clear every condition with evidence.
A file built to these standards from the start rarely has a loan removed. We return a bid within 24 hours of a tape or seller portal registration. The bid is priced on that data, and a clean, consistent file is what keeps it where it started through diligence.
To see how these standards fit into the process from bid to purchase, read how we buy loans.
