In real estate investing, especially in fix-and-flip or rental rehab projects, the Scope of Work (SOW) is one of the most important documents in your loan package. Yet it’s one of the most misunderstood. Many new borrowers think of it as a quick checklist. Lenders think of it as a risk assessment tool. That difference in perspective can either make your project run smoothly — or cause delays, budget issues, and funding problems.
This guide walks you through how to build a lender-ready Scope of Work that is detailed, realistic, and structured for fast approvals.
Why the SOW Matters
Your SOW drives multiple underwriting decisions:
• Loan amount and budget approval
• Draw schedule creation
• Timeline validation
• Inspection checkpoints
• Collateral and risk evaluation
A vague SOW forces underwriters to guess, which increases risk and slows the file.
What Causes SOWs to Get Rejected
Most rejected SOWs fail for predictable reasons:
• No detailed line items
• No materials list
• Missing labor estimates
• No photos of current conditions
• Unrealistic timeline (best-case scenario)
• No contractor documentation
Lenders need clarity, not assumptions.
How to Build a Lender-Ready Scope of Work
1. Break It Down Room by Room
A clean SOW organizes work by area:
• Exterior
• Kitchen
• Bathrooms
• Bedrooms
• Basement
• Mechanical systems
Each line item should include what will be repaired, replaced, or installed.
Example:
“Kitchen – Install white shaker cabinets, 36 linear ft, labor $1,200, materials $1,450.”
2. Itemize Materials and Labor Separately
Lenders want to see cost structure, not a lump-sum number.
At minimum:
• Material type
• Quantity
• Unit cost
• Total cost
• Labor cost per task
This transparency shows pricing realism.
3. Include Before Photos
Photos are required for draw inspectors later — and extremely helpful during underwriting.
They:
• Verify the project scope
• Confirm repair necessity
• Reduce risk disputes
• Support budget accuracy
Always attach labeled photos with your SOW.
4. Provide Contractor Documentation
Your contractor’s credibility matters.
Include:
• License
• Insurance
• Contract or bid
• Contact information
If you’re the general contractor, state it clearly.
5. Set a Realistic Timeline
Rehab projects rarely go perfectly.
Lenders expect conservative timetables.
Break your schedule into phases:
• Demo
• Structural
• Mechanical
• Rough finishes
• Final finishes
• Punch list
Give estimated start and completion dates.
6. Include Contingencies
Savvy investors build in 5–10% contingency.
Lenders appreciate this because it reduces budget risk.
Common Mistakes to Avoid
• Listing “paint” with no details
• Not specifying materials (e.g., flooring type)
• No mechanical system evaluation
• Over-optimistic timeframes
• Missing safety items like permits or code compliance
A lender-ready SOW should answer more questions than it creates.
Final Thoughts
A good SOW isn’t paperwork — it’s your project blueprint.
It protects your budget, reassures your lender, and speeds up approvals. When your SOW is detailed, organized, and supported with photos and contractor documentation, your entire rehab runs smoother from start to finish.
A strong SOW = smooth underwriting + predictable construction + higher profit.
If you’d like help strengthening your next loan file, I’m here for you.
Reach out anytime:
WhatsApp: +1 448-230-7488
Phone: +1 201-680-0991
Email: annie@insightflending.com
