There's an increased risk (not a guarantee, just an increase) that they'll cover something up, exaggerate performance, etc.

I have a lot of problems with lenders that are not based in ohio or local in regards to getting appraisals ordered or them exaggerating the condition of the property and making a laundry list of items subject to because they are not familiar with the market.

I'm sure he is exaggerating income.

It sounds to me like it the issue is exaggerated.2. 

I.e. gross exaggeration of qualifications, missing paperwork (this could sometimes be intentional), vague responses to important questions5.

"By our math, both single-family and multi-family production are already ahead of normalized demand and estimates of a housing deficit are grossly exaggerated." 

To give an exaggerated analogy. 

In my town little backwards town in the middle of Ohio of 50,000 population there are 2 model S vehicles, and I am not exaggerating to you - I can't go into a car wash, coffee shop next to my office, or to pick up my kids at school, the car is the subject of desire.

Its not always the best price that gets the property, terms and conditions will play a big role as well...as a listing broker myself I can say that I may sometimes 'exaggerate" the situation to help move things along and get people to put pen to paper...on the buy side I have structured offers in a way that the terms and conditions have trumped price in multiple offer situations...it also depends on the brokers involved and relationships that I have with them, ie. knowing that they other broker can get it done vs. a newbie with no experience that needs hand holding...just my opinion ! 

I found out that the seller for Des Plaines house exaggerated about what his house is worth (of course, I will check the numbers).