Your hard money lender does not fund a gut feeling. They fund a scope of work (SOW) — a line-item rehab budget that proves you know what the property needs, what it will cost, and how those dollars map to after-repair value. A sloppy SOW delays approval, caps your rehab holdback, or kills a deal entirely when the numbers do not reconcile.
Whether you are flipping a distressed ranch in Indianapolis or tuckpointing a Chicago two-flat, the SOW is the document that connects your contractor’s bid to your lender’s draw schedule. Get it right before you close, and every draw inspection moves faster. Get it wrong, and you will be rewriting budgets mid-demo while carrying costs stack up.
This guide walks through exactly what hard money lenders expect in a scope of work, how to structure one lenders will approve, and the mistakes that slow first-time borrowers down.
What Is a Scope of Work and Why Does Your Lender Need One
A scope of work is a detailed renovation plan that lists every planned improvement, the materials or labor involved, and the estimated cost for each line item. For fix-and-flip and heavy BRRRR projects, it serves three purposes at once:
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Underwriting validation — The lender compares total rehab cost plus acquisition basis against after-repair value (ARV). If your SOW totals $85,000 on a property with $310,000 ARV and $215,000 all-in, the deal math works. If your SOW says $45,000 but comparable sales support a $60,000 rehab, underwriting will ask why you are under-budgeting — or over-leveraging.
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Draw schedule blueprint — Rehab funds are not wired at closing in one lump sum. They sit in a holdback and release in draws as work completes. Your SOW categories become the milestones an inspector verifies in the field.
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Risk control — Lenders want to know you are not planning illegal conversions, skipping permits, or leaving structural issues unaddressed. The SOW is your written commitment to what the property will become.
Hard money is asset-based lending. The collateral is the property after you execute the plan in the SOW. That is why every serious lender — including Jaken Finance Group — requires an approved scope before or at closing, not a verbal “we will figure it out on site.”
What Hard Money Lenders Look for in a SOW
Underwriters scan for completeness, realism, and alignment with the exit strategy. Here is what moves a scope from “submitted” to “approved.”
Line-item detail, not lump sums
A single line reading “Rehab — $72,000” will be rejected or sent back for revision. Lenders want trade-level detail:
| Category | Example line items |
|---|---|
| Demo & haul-off | Interior gut, dumpster fees, asbestos test if pre-1978 |
| Structural | Sister joists, beam replacement, foundation patch |
| Mechanical | Panel upgrade, new furnace, water heater, mini-split |
| Kitchen | Cabinets, counters, appliances, plumbing rough-in |
| Baths | Tile, vanity, tub/shower, vent fan |
| Exterior | Roof section repair, siding, gutters, landscaping |
Each line should show quantity, unit cost, and extended total. Spreadsheet format is standard.
Contingency that matches the asset
Experienced sponsors include 10%–15% contingency on heavy rehabs and 5%–10% on cosmetic flips. Zero contingency signals inexperience. Excessive contingency without explanation signals padding. If you are buying a 1920s brick two-flat with knob-and-tube and a shared boiler, 12% contingency is reasonable. If you are painting and flooring a 2010 build, 5% is enough.
Contractor accountability
Lenders want a named general contractor or a clear self-manage plan with licensed subs for electrical, plumbing, and HVAC. Include:
- Company name, contact, and license number (where required)
- Certificate of insurance (general liability, workers comp)
- Signed bid or proposal dated within 30–60 days of application
- Payment terms that align with your draw schedule
Self-performing investors can still get approved, but you will need to document trade licenses where applicable and show prior project photos or references.
Permit and inspection costs
Chicago Department of Buildings permits, DC TOPA-adjacent compliance, Florida wind mitigation — local friction belongs in the SOW as its own line items. Lenders know permit delays extend hold time. Budgeting $3,000–$8,000 for permits on a multifamily rehab is not padding; it is honesty.
ARV support that matches the finish level
Your SOW implies a finish grade. If you budget laminate counters and rental-grade carpet, your ARV comps should be rental-grade renovated sales — not luxury flips on the same block. Mismatch between scope finish and comp selection is one of the fastest ways to get a lower rehab holdback or a reduced max loan amount.
SOW Template: What to Include
Use this structure as your starting template. Copy it into a spreadsheet and fill every section before you submit your loan package.
Header block
- Property address and legal description
- Borrower entity name
- Acquisition date (or expected close)
- GC name, license, phone, insurance expiration
- Total rehab budget (hard costs + contingency)
- Estimated timeline in weeks
- Target list or hold date
Interior scope sections
Break each room or zone into measurable work:
- Demo: Square footage of removal, hazmat if applicable
- Framing / drywall: LF of new walls, sheet count, texture match
- Electrical: Panel amperage upgrade, outlet/switch count, permit fee
- Plumbing: Fixture count, water heater, repipe LF if needed
- HVAC: System tonnage, ductwork, thermostat
- Kitchen: Cabinet LF, counter SF, appliance allowance, backsplash
- Bathrooms: Per-unit breakdown — vanity, tile SF, plumbing trim
- Flooring: SF by material type per level
- Paint: SF interior, exterior if applicable
- Trim / doors: Count of new doors, baseboard LF
Exterior and site work
- Roof (repair vs. replacement — specify)
- Siding, masonry, tuckpointing
- Windows and doors (count and size)
- Landscaping, grading, driveway
- Fence, deck, porch structural repair
Soft costs tied to construction
- Building permits and plan review
- Architect or engineer (if required)
- Dumpster and portable toilet rental
- Final cleaning and staging (if flip)
Summary tab
| Field | Your number |
|---|---|
| Hard construction costs | $ |
| Contingency ( % ) | $ |
| Permits & fees | $ |
| Total rehab budget | $ |
| Acquisition price | $ |
| Closing costs & carry (estimate) | $ |
| Total project cost | $ |
| ARV (supported by comps) | $ |
| Spread / margin | $ |
Run your numbers through the fix-and-flip calculator before you submit — if margin compresses below your minimum, fix the SOW or renegotiate purchase price before the lender sees it.
Common SOW Mistakes That Delay Loan Approval
Under-scoping structural and mechanical work
Investors who budget cosmetic upgrades on a property with active water intrusion, Federal Pacific panels, or a 30-year roof will get pushback. Walk the property with your GC before you write the SOW. Open the panel. Run every faucet. Look at the roof deck from the attic. Structural and mechanical surprises are the number-one reason rehab budgets blow up — and lenders know it.
Misaligned draw milestones
If your SOW front-loads kitchen and bath finish work but back-loads rough-in, your first draw request will not match completed work. Sequence the SOW in the order trades actually run: demo → rough mechanicals → insulation/drywall → trim → finish. Your draw schedule depends on this order.
Stale or unsigned contractor bids
A bid from six months ago on a different property is not valid support. Lenders want current, property-specific proposals. If material costs shifted since the bid, note the escalation assumption or refresh the bid.
Ignoring seasonality
Illinois masonry and roofing slow in winter. Florida exterior work accelerates in dry season. A timeline that assumes a 90-day rehab starting in December in Chicago without winter contingency will fail lender scrutiny. Build weather and permit delays into both the SOW timeline and your carry cost model.
Finish level that does not match the neighborhood
Over-improving relative to comps wastes rehab dollars without lifting ARV. Under-improving produces a product that will not sell or rent at the projected number. Your SOW finish spec should match the middle of your comp set — not the highest sale on the block unless you have a specific reason (waterfront, historic district premium, etc.).
Missing contingency on first-time deals
First-time sponsors who submit razor-thin budgets signal they have not managed a rehab before. Lenders interpret zero contingency as inexperience, not optimism. Include a reasonable buffer and explain it in your cover note if the property is straightforward.
How Jaken Reviews Scopes of Work
At Jaken Finance Group, scope review is part of asset-based underwriting — not a bureaucratic checkbox. Our team reconciles your SOW against three anchors:
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Third-party or internal ARV opinion — We compare your projected value to recent comps with similar bed/bath count, square footage, and finish level. If your SOW implies a luxury kitchen but comps are standard investor renovations, we will ask you to align one or the other.
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Loan-to-cost and loan-to-ARV limits — Your total project cost (acquisition + rehab + selected soft costs) must fit program leverage. A perfect SOW on a deal that exceeds LTC caps still will not fund at the requested amount — we will show you the max workable budget.
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Draw feasibility — We map your line items to a standard milestone draw schedule. Categories that cannot be inspected independently ( vague “miscellaneous” lines ) get split or clarified before approval.
Typical review timeline: 24–48 hours after complete submission during business days. Incomplete packages — missing insurance certs, unsigned bids, or no contingency — go back to the borrower the same day with a specific punch list.
What we do not require: architectural renderings on a standard SFR flip, or engineer stamps unless local code demands it. What we do require: honest numbers, licensed trades where the jurisdiction requires them, and a scope you are willing to stand behind when the draw inspector walks the property.
For deeper context on how rehab dollars fit into the overall flip structure, read our posts on fix-and-flip financing fundamentals and understanding loan-to-cost ratios.
Download Our SOW Checklist
Before you upload your scope to underwriting, run through this checklist:
- Room-by-room line items with quantities and unit costs
- 5%–15% contingency appropriate to property condition
- Named GC with signed bid dated within 60 days
- GC insurance certificate (GL + workers comp)
- Permit and fee line items for your municipality
- Timeline in weeks, sequenced for draw milestones
- ARV comp set that matches finish level in the SOW
- Total project cost tested in the fix-and-flip calculator
- Entity docs and purchase contract ready to submit together
Get the full playbook: Our Fix-and-Flip Financing Guide walks through ARV math, draw schedules, and scope basics in one downloadable resource — the same framework our underwriting team uses when reviewing sponsor packages.
Ready to submit your deal? Get pre-qualified with Jaken Finance Group — upload your SOW, purchase contract, and comps. Most complete files receive term sheets within one business day.