What is a scope of work for a hard money loan?

A scope of work (SOW) is a written breakdown of every renovation task you plan to complete on the property, along with the estimated cost of each item. Hard money lenders like Veristone Capital use the SOW to determine how much rehab funding to approve and to set the terms of the draw schedule. It is a required part of the loan file on any project that includes renovation financing.

What line items should a scope of work include?

A strong scope of work lists each trade or task separately with a dollar amount. Common line items include demolition, framing, electrical, plumbing, HVAC, roofing, windows, drywall, flooring, paint, kitchen, bathrooms, landscaping, and general conditions or permits. Veristone Capital expects the SOW to cover every phase of the project so there are no gaps between what you plan to do and what you are asking us to fund.

How detailed does a scope of work need to be?

The more detail the better. At minimum, each line item should describe the work being done, the area of the property it applies to, and the cost. For example, "Kitchen remodel, full gut and replace cabinets, countertops, appliances, and fixtures, $28,000" is far more useful to a lender than "Kitchen, $28,000." Veristone Capital reviews every SOW line by line, and vague entries slow down the approval process.

How does a lender evaluate a scope of work?

Veristone Capital compares the SOW against the property condition, the proposed after-repair value, and current market costs for similar work. If the total rehab budget looks too low for the planned improvements, or if key items are missing, we will flag it before issuing a term sheet. The goal is to make sure the budget is realistic and the project pencils out for everyone involved.

What happens if my rehab costs change after closing?

Cost changes happen on nearly every project. If you discover additional work or material prices shift, notify your lender as soon as possible. Veristone Capital can review a revised scope of work and, where appropriate, adjust the remaining draw schedule. Keeping your lender informed avoids surprises at inspection time and keeps your project on track.

Do I need contractor bids to submit a scope of work?

Contractor bids are not always required, but they strengthen your loan file. If you are an experienced investor doing the general contracting yourself, a self-prepared SOW with realistic line-item costs is often sufficient. For larger or more complex projects, Veristone Capital may request one or more contractor bids to verify pricing and confirm the work plan is complete.

What are common mistakes borrowers make on a scope of work?

The most frequent mistakes are underestimating costs, leaving out line items like permits or haul-off, and submitting a single lump sum instead of an itemized breakdown. Another common issue is listing finish-level upgrades that do not match the neighborhood or the target ARV. Veristone Capital reviews every SOW with an eye toward whether the budget supports the exit strategy.

How does the scope of work tie to the draw schedule?

The draw schedule is built directly from the scope of work. Each draw request corresponds to completed line items in the SOW, and Veristone Capital inspects the work before releasing funds. A well-organized scope of work makes the draw process faster and smoother because there is a clear benchmark for what should be done at each stage of the renovation.

Scope of Work Questions for Hard Money Rehab Loans

A scope of work is one of the most important documents in a hard money rehab loan. Veristone Capital uses it to size the rehab holdback, set the draw schedule, and confirm the project makes financial sense.

What is a scope of work for a hard money loan?: A scope of work (SOW) is a written breakdown of every renovation task you plan to complete on the property, along with the estimated cost of each item. Hard money lenders like Veristone Capital use the SOW to determine how much rehab funding to approve and to set the terms of the draw schedule. It is a required part of the loan file on any project that includes renovation financing.
What line items should a scope of work include?: A strong scope of work lists each trade or task separately with a dollar amount. Common line items include demolition, framing, electrical, plumbing, HVAC, roofing, windows, drywall, flooring, paint, kitchen, bathrooms, landscaping, and general conditions or permits. Veristone Capital expects the SOW to cover every phase of the project so there are no gaps between what you plan to do and what you are asking us to fund.
How detailed does a scope of work need to be?: The more detail the better. At minimum, each line item should describe the work being done, the area of the property it applies to, and the cost. For example, "Kitchen remodel, full gut and replace cabinets, countertops, appliances, and fixtures, $28,000" is far more useful to a lender than "Kitchen, $28,000." Veristone Capital reviews every SOW line by line, and vague entries slow down the approval process.
How does a lender evaluate a scope of work?: Veristone Capital compares the SOW against the property condition, the proposed after-repair value, and current market costs for similar work. If the total rehab budget looks too low for the planned improvements, or if key items are missing, we will flag it before issuing a term sheet. The goal is to make sure the budget is realistic and the project pencils out for everyone involved.
What happens if my rehab costs change after closing?: Cost changes happen on nearly every project. If you discover additional work or material prices shift, notify your lender as soon as possible. Veristone Capital can review a revised scope of work and, where appropriate, adjust the remaining draw schedule. Keeping your lender informed avoids surprises at inspection time and keeps your project on track.
Do I need contractor bids to submit a scope of work?: Contractor bids are not always required, but they strengthen your loan file. If you are an experienced investor doing the general contracting yourself, a self-prepared SOW with realistic line-item costs is often sufficient. For larger or more complex projects, Veristone Capital may request one or more contractor bids to verify pricing and confirm the work plan is complete.
What are common mistakes borrowers make on a scope of work?: The most frequent mistakes are underestimating costs, leaving out line items like permits or haul-off, and submitting a single lump sum instead of an itemized breakdown. Another common issue is listing finish-level upgrades that do not match the neighborhood or the target ARV. Veristone Capital reviews every SOW with an eye toward whether the budget supports the exit strategy.
How does the scope of work tie to the draw schedule?: The draw schedule is built directly from the scope of work. Each draw request corresponds to completed line items in the SOW, and Veristone Capital inspects the work before releasing funds. A well-organized scope of work makes the draw process faster and smoother because there is a clear benchmark for what should be done at each stage of the renovation.

Tim Mushen

VP of Marketing and Technology

Disclaimer: Veristone Capital does not provide legal or financial advice. The information on this page is for general informational purposes only and should not be construed as legal, financial, or tax advice. Consult a qualified attorney, accountant, or financial advisor to evaluate your specific situation before making any investment or lending decisions.

Ready to get started?

Contact Veristone Capital today to discuss your project and get a fast, no-obligation quote.

Get PreQualified

Scope of Work Questions for Hard Money Rehab Loans

Ready to get started?

Loan Types

Resources

Company