Second Look Fix-and-Flip Leverage Rescue

Problem — original financing fell through

An experienced fix-and-flip sponsor had a southeastern 3/2 under contract at $240,000 purchase with a $65,000 rehab budget and $410,000 ARV support from documented comps. The first hard money lender issued a term sheet near 90% loan-to-cost, then — seven days before closing — cut leverage to 80% LTC, requiring roughly $30,500 additional cash the sponsor could not deploy without killing reserves for carry and draws.

The seller had a backup offer. The contract was one extension away from cancellation.

Property snapshot

Item	Amount
Purchase	$240,000
Rehab budget	$65,000
Total project cost	$305,000
ARV	$410,000
Original lender (withdrawn)	~90% LTC → cut to 80% LTC

Challenge

The sponsor needed ≥90% LTC for the deal to work on the spread after interest-only carry and sale costs — not because the asset was weak, but because the first lender’s final committee moved the goalposts. Starting a brand-new application from zero would miss the extension window.

Second Look solution

The sponsor submitted the Second Look form with:

• Executed purchase contract
• Full scope, budget, and comp packet already built for lender #1
• Uploaded original term sheet showing 90% LTC approval and the 80% LTC withdrawal email

The Second Look Desk ran asset-based review on collateral and exit — not the reason lender #1 retreated — and restructured fix-and-flip hard money near 90% LTC with milestone draws on the existing scope. Credit was reviewed; approval was driven by ARV, LTC, and resale liquidity.

Result — closed

Milestone	Timing
Second Look submitted	Day 0
Term sheet issued	Day 2
Underwriting cleared	Day 6
Wire / close	Day 9

The sponsor closed, completed rehab on schedule, and marketed for exit at $410,000 ARV. The Save the Deal outcome: contract preserved, seller relationship intact, spread intact.

Save the Deal takeaway

When leverage changes late — not economics — upload the original terms and hit jakenfinancegroup.com/rescue before you release the contract. Rescue files move fastest when the diligence package already exists from lender #1.

Sponsor profile

The borrower was an experienced fix-and-flip sponsor — not a first-deal file — with prior closed projects in the same market. Credit was reviewed under asset-based underwriting; approval rode on ARV, LTC, documented scope, and resale exit. The sponsor had entity docs, bank statements, and comp support already built for lender #1 — the package Second Look needed was largely complete on day zero.

What lender #1 offered — and withdrew

Lender #1 issued a term sheet near 90% loan-to-cost on the $305,000 total project ($240,000 purchase + $65,000 rehab). Seven days before contract close, final underwriting cut leverage to 80% LTC, requiring roughly $30,500 additional cash the sponsor could not deploy without draining reserves needed for interest carry and draw milestones.

The withdrawal arrived by email — not silence — which gave the sponsor documentation for Second Look: original 90% term sheet plus 80% retrade message. That paper trail shortened rescue review because the desk saw exactly what broke.

Economics that made rescue viable

Line item	Amount
ARV (comp support)	$410,000
Total project cost	$305,000
Gross spread before costs	~$105,000
Cash gap at 80% LTC	~$30,500
Cash gap at 90% LTC	$0 (fully leveraged)

The deal was not a bad buy. It was a leverage retrade — the spread supported rescue pricing at ~90% LTC even after interest-only carry and sale costs. Starting a brand-new application from zero would have missed the seller’s extension window.

Second Look process — day by day

Day 0 — Submission. Sponsor uploaded executed contract, full scope and budget, comp packet, entity docs, bank statements, and the original term sheet showing 90% → 80% LTC change on the Second Look form.

Day 1–2 — Asset-based review. Second Look Desk underwrote collateral and exit — ARV, LTC, draw schedule, resale liquidity — not why lender #1 retreated. Credit reviewed; collateral drove approval.

Day 2 — Term sheet. Restructured fix-and-flip hard money near 90% LTC with milestone draws tied to approved scope and interest-only carry aligned to existing exit timeline.

Day 3–6 — Underwriting clearance. Title, insurance, and entity verification — accelerated because lender #1 had already collected most diligence.

Day 9 — Wire / close. Closed inside seller extension window. Seller relationship preserved; backup offer never activated.

Why a term sheet can change after it is issued

Sponsors often treat a term sheet like a locked consumer mortgage quote. It isn’t. Federal Truth in Lending rules exempt credit extended primarily for a business, commercial, or agricultural purpose, and credit extended to a borrower that is not a natural person, under 12 CFR § 1026.3(a). An LLC buying a flip falls on the exempt side of that line.

That exemption cuts both ways. Consumer mortgages must deliver the Closing Disclosure at least three business days before consummation under 12 CFR § 1026.19(f)(1)(ii). Business-purpose loans skip that waiting period, which is part of why a rescue can close in nine business days. The same freedom means a business-purpose term sheet carries no federal tolerance limits. Leverage, rate, and conditions can change until the loan documents are signed.

Read every term sheet for the words that let it move: “subject to final credit committee,” “subject to valuation review,” and “subject to verification of liquidity.” Lender #1 used the second one.

The leverage math, line by line

Jaken Finance Group sizes fix-and-flip loans to the lower of loan-to-cost and 75% of after-repair value. Qualified files can reach up to 100% LTC. Here is how this deal looked at each leverage level:

Leverage on $305,000 cost	Loan amount	Loan as % of $410,000 ARV	Inside 75% ARV cap?
80% LTC (lender #1 retrade)	$244,000	59.5%	Yes
90% LTC (rescue)	$274,500	67.0%	Yes
100% LTC	$305,000	74.4%	Yes — barely

The ARV cap was $307,500, so value never limited this file. That was the clue that lender #1’s cut came from internal policy, not the collateral. When the loan sits well under 75% of ARV and the cut still happens, another lender may see the same asset differently.

Profit at 80% vs 90% leverage

Illustration only. It assumes a 6-month hold, an 11% interest-only rate inside the published 8.99%–13.5% band, rehab drawn evenly over four months, $9,000 in closing costs on the buy, $6,000 in taxes, insurance, and utilities, and 7% sale costs.

Line	80% LTC	90% LTC
Loan	$244,000	$274,500
Interest over 6 months	~$11,930	~$13,610
Sponsor cash at closing (equity + closing costs)	$70,000	$39,500
Net profit after sale	~$49,370	~$47,690
Profit as % of cash invested	~71%	~121%

Higher leverage cost about $1,700 in extra interest. It also freed $30,500 of liquidity, which the sponsor needed for draw timing and reserves. That trade is why the sponsor fought for 90% instead of draining cash to accept 80%.

For context, ATTOM’s Q2 2026 U.S. Home Flipping Report put the typical gross flipping profit at $60,526, down from $71,000 a year earlier. ATTOM measures gross profit as resale price minus purchase price, before rehab and carry. On that measure this deal had a $170,000 gap between purchase and ARV. Strong deals like this one are the files worth rescuing.

Red flags that leverage may move late

Watch for these before you are seven days from closing:

• Valuation review still open. If the lender has not reviewed the ARV comps yet, the loan amount is not final.
• Vague scope lines. “Kitchen — $25,000” invites a haircut. Line items with quantities and contractor bids hold up better.
• Liquidity not yet verified. Lenders often size leverage partly on reserves. Send statements early.
• Entity documents missing. Operating agreements, good-standing certificates, and EIN letters should be in the file before committee review.
• Lender capacity changes. Some cuts have nothing to do with your deal. Ask directly whether the change is file-specific or a policy shift.

If any of these are open at day 10 before closing, start building your backup. The fix-and-flip loan requirements guide lists what a complete package looks like.

What a Second Look cannot fix

Being clear about limits saves everyone time. A rescue works when the deal economics are sound and only the capital failed. It does not work when:

• The ARV comps do not support the exit value at any reasonable leverage
• Title has an unresolved lien, probate issue, or boundary dispute that blocks insurable title
• The rehab scope is undefined or the contractor cannot document it
• The spread disappears once realistic carry and sale costs are included
• The seller will not grant any extension and closing is within 48 hours

When those issues exist, the honest answer is to renegotiate price or terms with the seller, not to find a lender who will overlook them. The fix-and-flip financing fell through guide covers renegotiation options.

How the seller extension was framed

The sponsor asked for one short extension and explained why. The request named the replacement lender, gave a target closing date, and offered to keep the earnest money at risk. Sellers with backup offers respond to specifics. A vague “financing delay” message invites them to call the backup buyer.

Check your contract’s financing contingency deadline before you write that request. If the contingency has already expired, your earnest money may be exposed. A local real estate attorney can tell you what your contract allows.

Draw schedule and exit

Rescue financing tied draws to the existing approved scope — foundation, systems, cosmetic — with inspections at milestones. The sponsor completed rehab on schedule and marketed toward the $410,000 ARV exit. No plan change was required; only replacement capital at the leverage the deal always needed.

Lessons for sponsors and agents

Upload the original term sheet. Rescue starts where lender #1 stopped. The 90% → 80% email was the most valuable document in the file.

Do not release the contract on day one. The sponsor negotiated one extension while Second Look ran — framed as lender switch, not deal death.

Complete files close in 7–10 business days. This file closed in nine. Missing scope or entity docs would have blown the extension.

Leverage retrade ≠ bad asset. When economics work at rescue leverage, hard money lender backed out scenarios are saveable.

If your deal looks like this

Hard money loan denied, leverage cut late, or lender backed out before closing on a fix-and-flip with documented ARV and scope? Submit before you walk:

Submit to the Second Look Desk · Quick link: jakenfinancegroup.com/rescue · Urgent: (833) 264-7776

Related: fix-and-flip financing fell through · hard money loan denied · investment property loan denied · lender backed out before closing · real estate financing fell through · Second Look overview