IPN was not sent, and the handshake was not verified. Please review your information.

The handshake error is most likely to occur when your server/keystore config is non-compliant with the upgraded PayPal SSL encryption algorithms.

IPN simulator will connect againest the PayPal Sandbox environment, which has been upgraded with Versign G5 root cert / SHA-2 encryption algorithms (btw this is an industry standard as supposed to be everywhere in 2016).
Once your IPN host failed to meet the compliance, the SSL connnection will error out with handshake problems.

Simply check your server by running a connection script against the PayPal sandbox endpoint like this:

openssl s_client -connect api-3t.sandbox.paypal.com:443 -showcerts -CApath /etc/ssl/certs/ 

If you were not getting an Verify return code: 0 (ok), you would probably have to check the cert/SHA-2 compatibility, following the general instructions that PayPal has published here:

2015-2016 SSL Certificate Change Microsite

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