Fix and Flip Scope of Work: What Lenders Need

A complete SOW breaks down every renovation category with specific line items and costs. Essential sections include structural repairs (foundation, framing, roof), mechanical systems (HVAC, electrical, plumbing), interior finishing (drywall, flooring, paint, fixtures), kitchen and bath upgrades, appliances, landscaping, and contingency reserves (typically 10–15% of total rehab budget). Each line item should have an estimated cost based on local contractor bids or your construction experience. The SOW also includes a rough timeline showing when each phase begins and ends, supporting your 12 months loan term. Vague categories like 'miscellaneous repairs' or 'finishing' raise red flags; lenders want specificity to assess project scope and budget realism.

LYNK Mortgage and other lenders use your SOW to calculate loan-to-cost (LTC) ratios, typically allowing up to 95% LTC on fix-and-flip projects. They compare your rehab budget against comparable projects in your market and verify costs are realistic for the ARV you're targeting. If your total project cost (purchase + rehab + closing costs) divided by ARV exceeds their LTC limit, the loan is denied or the amount is reduced. Lenders also assess your SOW against the property's current condition and photos to ensure you haven't missed major repairs. A weak SOW suggests inadequate due diligence or lack of construction knowledge, both red flags for approval. Professional investors submit scopes with contractor estimates, floor plans, and before/after photos to support their numbers.

Underestimating rehab costs is the most frequent SOW mistake. New investors often omit permit costs, contingency reserves, or phase specific expenses like temporary utilities or dumpsters. Overestimating ARV relative to rehab spend is equally dangerous—if market comps don't support your projected sale price, lenders won't fund the gap. Inflated or missing contractor bids hurt credibility; always get written quotes from licensed contractors. Another critical error is scope creep during execution—underspecifying kitchen work then upgrading mid-project strains your budget and may exceed your LTC allowance. Submitting a SOW without understanding local labor costs and supply chain constraints signals inexperience. LYNK Mortgage favors investors who demonstrate thorough market research and conservative underwriting.

Start with a detailed property inspection and create a line-item list of every deficiency. Get bids from at least two licensed contractors for major systems and finishes. Research your local market's per-square-foot rehab costs and compare your budget against published benchmarks. Include a 10–15% contingency reserve to account for hidden issues—lenders expect this and will account for it in LTC calculations. Present your SOW professionally: use a spreadsheet with categories, costs, and phase timelines. Include recent contractor estimates, photos of the current condition, and comps showing your ARV is achievable. If you're new to investing, consider hiring a professional property inspector or experienced contractor to validate your scope before submission to LYNK Mortgage. Transparent, detailed SOWs build lender confidence and expedite underwriting.