How To Create A Scope Of Work & Why Is It Important?

What Is A Scope Of Work?

One of the most important parts of flipping a house is called the SOW or “Scope Of Work”.  A Scope Of Work lays out the detail for all of the planned renovations and construction that will be taking place. The SOW will enable you to; firstly manage each and every step of the construction project.  The SOW will also enable you to hold your contractors accountable. Most importantly for the lender it helps them determine the ARV or After construction or improvement repair value.

A real professional scope of work will many times be in spreadsheet form, with different areas of the scope dedicated to different parts of the rehab and construction.  For a sample scope of work, click here.  

CHL [CambridgeHomeLoan.com] uses this format in their fix and flip underwriting. If you download this form, you can overwrite the fields while putting together your own SOW.

Various Components of a Scope Of Work

Your SOW should be very specific and thorough. Broadly, it should include what work is being done, who will be doing the work, timeline for completion, and the associated estimated costs.

The following components should all be included in a scope of work:

Project overview: A detailed description of the goals of the construction project, the work that is going to be done, and deliverables. It should include insight into quality of materials, room or square foot additions, room conversions, redesigns, and any other work that is going to be done on the home. Most people split their SOW into interior and exterior, and then split the interior into the various rooms and the exterior into the front of the house, back of the house, and landscaping.

Management team: List who will be managing the project and their contact information. This will typically be the general contractor and/or contractor team. For contractors, list their licenses and license numbers.  

Budget & Costs: Detailed breakdown of how much you plan to spend for each step of the project. Be thorough and specific — go room by room and detail what you plan to work on and how much it will cost.

Project Schedule: Explain in what order the different tasks of the construction project will be undertaken, and how long each task will take. Remember, rehab projects typically take longer than expected and things may not go exactly according to plan, so give yourself some wiggle room.

Acceptance: Clearly outline all inspection requirements, testing and validation processes, permits that need to be obtained, approval process, and borrower sign-offs.

Click here to download a construction scope of work example.

How do I get a quote on my Fix and Flip, Click Below!

 

When submitting your cost estimates, you’ll need to specify the target quality of finishes for the project (low, mid, or high-range). Here are some examples of the types of materials for different types of construction projects which would be considered low, mid, and high range:

  Low-Range Mid-Range High-Range
Flooring laminate stick tile Pergo, snap custom fitted, pro laid
Cabinetry prefab laminate, mdf prefab wood custom wood
Kitchen laminate counters granite counter marble counters
Bathrooms fiberglass shower inserts tile shower surrounds
Appliances enamel stainless steel Kitchen Aid, Viking, Wolf

If you have questions regarding the grade of your materials, contact your Experience Manager.

Once you’ve completed all the sections in the scope of work,  Your Experience Manager will review for completion of the following:

  • Narrative description
  • Line item description
  • Contractor information
  • “Extensive” trigger questionnaire
  • Finish quality descriptions
  • Ensure contingency is included

A Feasibility Analyst will then review your construction project for factors such as a high likelihood of completion, accurately budgeted project cost, and  sufficient project timeline. The Feasibility Analyst will also determine if your project is ‘extensive’ or not. 

A construction project is deemed extensive if any of the following apply to your project:

  • Adding square footage
  • Performing structural work
  • Performing foundation work
  • The property has any natural or major disaster repairs (fire, mold, etc)
  • The property construction cost on the property exceeds 50% of the property purchase price

If your project is deemed extensive, a Licensed General Contractor will be required to manage the project for Access and Standard level borrowers, and a Feasibility Analyst will have to verify the General Contractor license.

We hope this helped you understand the importance of a Scope of Work in your construction project, and how to submit yours when working with us. If you have any questions regarding our process, reach out to your CambridgeHomeLoan.com Experience Manager.