The Scope Of Work is a document prepared by you (the real estate investor) or your general contractor to communicate, in detail, all of the work planned for a fix and flip, fix and rent or ground up construction project.
The scope of work is one of the most important loan processing documents because it is used by the appraiser to determine the after repair value (ARV) of the property. Your private lender (underwriter, loan committee) uses the ARV opinion from the appraisal report to determine the loan amount, and whether or not the deal even makes sense to fund.
If your scope of work is not thoughtfully prepared, your appraisal may come back low and the following can happen:
The most important things:
See "Project Information" section above, this is where you share your narrative when you work with OfferMarket as your private lender.
This is your opportunity to tell the story of this project and convince the appraiser and underwriter that you know what you're doing. Confidently pitch what you plan to do to increase the value of the property in a cost effective manner.
You may be busy and this may be the last thing you want to be spending time on, but the scope of work really is one of the best uses of your time. Not just to optimize your ARV, but also to think through the nitty gritty details of your project. Thoughtful completion of your scope of work will ensure your project is properly budgeted, executed and your profit (flip or cash out refi) is optimized.
You would be surprised how often borrowers say the rehab budget is one amount (i.e. $100,000) but then provide a scope of work with sections that add up to a different amount (i.e. $111,000).
A Certified General Appraiser has completed at least 300 hours of appraisal education and accumulated 3,000 hours of experience (at least 1,500 in non-residential appraisal work). Bachelor's degree or higher from an accredited university is required.