What Lenders Look For: Good vs. Bad Scope of Work

Question

As a private lender, the #1 reason loan approvals get stalled and draw requests get delayed isn't the property, it's a poorly written Scope of Work.

Here is what separates a lender-approved SOW from one that gets sent back for revisions:

The "Bad" SOW (What Delays Funding & Draws)

• Lump-Sum Quotes: Writing "Kitchen Remodel: $25,000" instead of line items. Third-party draw inspectors can't verify completion percentages on single lump sums.
• Vague Descriptions: Terms like "Update plumbing" or "Fix exterior." Lenders can't tell if that means replacing a faucet or re-piping the whole home.
• Missing Soft Costs: Zero budget allocated for city permits, trash dumpsters, architectural plans, or utility hold-backs.
•

Lump-Sum Quotes: Writing "Kitchen Remodel: $25,000" instead of line items. Third-party draw inspectors can't verify completion percentages on single lump sums.

Vague Descriptions: Terms like "Update plumbing" or "Fix exterior." Lenders can't tell if that means replacing a faucet or re-piping the whole home.

Missing Soft Costs: Zero budget allocated for city permits, trash dumpsters, architectural plans, or utility hold-backs.

The "Good" SOW (What Lenders Approve Fast)

• Itemized by Trade & Room: Line-by-line breakdowns separating rough trades (plumbing, HVAC, electrical) from cosmetic finishes (cabinets, tile, LVP).
• Quantified Specs: Specific details like "Replace 14 double-hung vinyl windows" or "Install 200 sq ft quartz counter."
• Milestone Draw Phases: Work organized into sequential phases (Demo ➔ Rough-Ins ➔ Drywall ➔ Finishes) so draws release cleanly as work is completed.
•

Itemized by Trade & Room: Line-by-line breakdowns separating rough trades (plumbing, HVAC, electrical) from cosmetic finishes (cabinets, tile, LVP).

Quantified Specs: Specific details like "Replace 14 double-hung vinyl windows" or "Install 200 sq ft quartz counter."

Milestone Draw Phases: Work organized into sequential phases (Demo ➔ Rough-Ins ➔ Drywall ➔ Finishes) so draws release cleanly as work is completed.

Has a vague contractor quote ever delayed a loan closing or draw payout for you? Drop your experience below! 👇

J Castro · Answer

Absolutely agree. From the lending side, a good Scope of Work can make a huge difference in keeping both the closing and construction draws moving.

One thing I’d add is that the SOW isn’t just about giving the lender more information—it also helps the borrower and contractor stay accountable to the original budget.

When the scope is broken down by trade, quantity, and phase, it becomes much easier to compare the original budget to what’s actually being completed in the field. It also helps identify potential budget issues early, rather than discovering them when the project is already halfway through.

Draw management is another big piece. If the SOW is structured around clear milestones, everyone has a better understanding of what needs to be completed before the next draw can be released.

We see this particularly with rehab and construction projects where the initial scope looks straightforward, but the details can make a big difference once work begins.

A well-prepared SOW really benefits everyone—the borrower, contractor, lender, and draw inspector. The more clearly the project is defined upfront, the fewer surprises there tend to be later.

Denise Supplee · Answer

A lot of times problems don't come from the big things, they come from things that weren't clearly communicated upfront.

Having a good scope of work and knowing exactly what is included can save a lot of frustration later. It helps everyone be on the same page before the work even starts.

G. Brian Davis · Answer

This is one of those things that doesn’t seem important until you’re in the middle of a project and money is tied up. A clear scope of work helps everyone stay on the same page; the investor, contractor, and lender. The more specific you are upfront, the fewer arguments and surprises you have later.

Some projects go sideways because the numbers looked good, but the plan to actually get there wasn’t detailed enough.

Kyle Trotman · Answer

As a plumber, good scopes of work are necessary for lenders, homeowners, just as they are for the actual contractors themselves.

Having a detailed scope of work as a contractor will assure your budget for materials and labor for the work you preformed are in line for your professional services.

In my opinion a strong scope of work will also include items that are currently unknown or need further assessment.

“If the waterlines are galvanized steel then full replacement will be advised.”

This is helpful to avoid unexpected repairs that could slow down the renovation while keeping the investor informed of possible scenarios.

Caleb Brown · Answer

Hard to find solid GCs, they are worth their weight in gold

What Lenders Look For: Good vs. Bad Scope of Work

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