Scope of Work (SOW)
A detailed, line-item plan of every repair and improvement in a rehab project, with costs. Lenders require an SOW to set the rehab budget, ARV appraisal, and draw schedule on a fix-and-flip loan.
A scope of work (SOW) is a detailed, itemized plan of everything that will be done in a renovation — every repair, upgrade, and improvement, broken down by area and task, with associated costs. It's the master document of a rehab: it defines what the project is, what it will cost, and how it will be funded.
What's in a scope of work
A good SOW is granular, usually organized room-by-room or system-by-system:
- Each task — e.g., 'kitchen: new cabinets, quartz countertops, appliances, flooring, paint.'
- Line-item costs — materials and labor for each task (hard costs).
- Quantities and specs — square footage, fixture grades, finishes.
- Sometimes a timeline tying tasks to phases.
The more specific the SOW, the more useful it is — to you, your GC, and your lender.
Why the SOW is central to rehab lending
On a fix-and-flip loan, the scope of work drives three critical things:
- The rehab budget. The SOW is the rehab budget — the lender funds the rehab portion based on it.
- The ARV appraisal. A subject-to (after-repair) appraisal values the property as if the SOW were complete. Give the appraiser a vague scope and you'll get a conservative ARV; a clear, detailed scope supports a stronger after-repair value.
- The draw schedule. Draws are released as the work in the SOW is completed and inspected. The SOW becomes the checklist against which the lender verifies progress and funds each draw.
A worked example (abbreviated)
| Area | Work | Cost |
|---|---|---|
| Kitchen | Cabinets, counters, appliances, floor | $14,000 |
| Baths (2) | Vanities, tile, fixtures | $9,000 |
| Whole house | Paint, flooring, trim | $12,000 |
| Systems | HVAC, water heater | $8,000 |
| Exterior | Roof repair, landscaping | $7,000 |
| Total SOW | $50,000 |
This $50,000 becomes the rehab budget the lender funds via draws and the basis for the ARV appraisal.
Practical guidance
- Be detailed and realistic. Get actual contractor bids; don't guess. An accurate SOW prevents the under-funding that strands a flip.
- Add a contingency. Even a great SOW won't catch every surprise — budget 10–20% on top.
- Align it with the GC contract and draws. When your SOW, GC contract, and lender draw schedule all match, the project funds and flows smoothly.
- It's a living tool. Track actual vs. budgeted as work progresses to catch overruns early.
The scope of work is the document that turns a rehab idea into a fundable, executable plan — and the quality of your SOW directly affects your ARV, your loan, and your odds of finishing on budget.
Frequently asked questions
What is a scope of work in a fix-and-flip?
A detailed, line-item plan of every repair and improvement in the renovation, organized by area or system, with material and labor costs for each task. It defines what the project is, what it costs, and serves as the basis for the rehab budget, the ARV appraisal, and the lender's draw schedule.
Why do lenders require a scope of work?
Because it drives the loan. The SOW sets the rehab budget the lender funds, gives the appraiser the basis for the after-repair value, and becomes the checklist for releasing draws as work is completed and inspected. A clear, detailed scope supports a stronger ARV and a smoother funding process.
How detailed should my scope of work be?
As detailed as possible — itemized room-by-room or system-by-system, with real contractor bids rather than guesses. A vague scope yields a conservative ARV and risks under-funding the project. Pair an accurate SOW with a 10–20% contingency, and align it with your GC contract and the lender's draw schedule.