What does a lender want to see in a contractor bid?

An itemised scope by trade with quantities and prices, on the contractor's letterhead, with their licence and insurance details, a timeline, and payment terms that match a draw structure rather than requiring large deposits.

Do lenders check the contractor?

Yes. Licence status, insurance including workers compensation and general liability, and whether they have completed projects of this type and size. Bids get reviewed before close rather than after.

Can you use your own crew or do the work yourself?

Often, on smaller scopes, with a properly itemised budget and realistic pricing for your own labour. Structural, electrical, plumbing and anything requiring a permit generally need a licensed trade.

Why would a lender reject a contractor bid?

Lump sums with no breakdown, pricing well below what the scope can be delivered for, no licence or lapsed insurance, or a payment schedule demanding most of the money before work begins.

BlogGuide

Contractor bids: what a lender checks before funding a rehab

Bids get reviewed before close, not after. What that review is actually looking for, and why the cheapest bid is usually the one that fails it.

August 20, 2026 · 4 min read

Bids get reviewed before close, not after. That ordering is deliberate, and it is the difference between finding out at closing that your budget does not work and finding out at drywall.

The review is not an attempt to second-guess your contractor. It is checking whether the document you are borrowing against is a real plan, because the rehab budget is the collateral for the rehab portion of the loan in the same way the property is collateral for the purchase.

What a real bid contains

Itemised by trade. Demolition, structural, roof, windows, siding, electrical split into rough and finish, plumbing likewise, HVAC, insulation, drywall, kitchen, bathrooms, flooring, paint, trim, exterior, permits.

Quantities where quantities exist. Squares of roofing, linear feet of gutter, number of windows with sizes, square footage of flooring by type. A bid with quantities can be checked. A bid without them cannot be checked by anyone, including you.

Prices against each line, not a single figure at the bottom.

On letterhead, with the business name, address, phone and licence number.

Licence and insurance details. General liability and workers compensation. The second one matters more than borrowers realise: an uninsured worker injured on your property is your problem, and it is the kind of problem that outlives the project.

A timeline, ideally by stage rather than a single completion date.

Payment terms. These should be capable of aligning with a draw structure. A contractor who requires sixty percent up front cannot be paid from a loan that reimburses completed work, and that mismatch has to be solved before closing rather than discovered at the first draw.

What the review is looking for

Does the bid match the scope of work? They are two documents that should describe the same project. Where the scope says full kitchen and the bid prices cabinet refacing, one of them is wrong, and the ARV was probably built on the more expensive one.

Does the bid match the ARV? A budget delivering a rental-grade finish cannot support an after repair value drawn from renovated comparables with quartz and hardwood. This mismatch is common and it is usually unintentional: the investor priced the work with one contractor and the value with a different standard in mind.

Is the pricing credible for this market? Costs are intensely local. A number that would be reasonable in one county can be impossible thirty miles away. The approach to building a defensible figure is in rehab cost per square foot.

Has this contractor done this before? Not a character judgement. A contractor who has never taken a project of this size and type to completion is a genuine risk on your file, and it is the risk that a low bid most often conceals.

Is there a contingency? Ten to fifteen percent, on its own line. A bid with no contingency is not a cheaper project, it is an unfunded one.

The cheapest bid

Worth saying plainly, because it is the most expensive mistake in this whole process: a bid materially below the others is not a saving. It is information.

It usually means one of a few things. The contractor has not understood the scope and will discover the difference as change orders. They have priced to win the job and intend to renegotiate once your walls are open and your carry is running. They are not carrying the insurance the others are carrying. Or they are underwater on another job and need your deposit to finish it.

By the time any of these surfaces, you have a partially demolished house, a contractor who wants more money, and interest accruing every day. Replacing a contractor mid-project routinely costs more than the original gap, because the replacement has to price around somebody else's unfinished work and will price that risk into their number.

When a bid comes in well under the rest, the useful response is to find out why, specifically, in writing.

Doing the work yourself

Frequently workable on smaller scopes, with two conditions.

The budget still has to be itemised and priced realistically, including materials at what they actually cost and your own labour at something other than zero. A budget that assumes free labour hides the real cost of the project from you, not just from the lender.

And the trades that require permits and licences still require them. Structural, electrical, plumbing, and gas work need licensed trades, and a permit inspection will establish that regardless of what the budget said. Unpermitted work discovered at your exit is a title and disclosure problem on top of a construction one.

The honest calculation is whether self-performing saves more than the additional months of carry it adds. Often it does not, and holding costs is where that arithmetic lives.

What to have ready

The itemised bid on letterhead, by trade, with quantities
Contractor licence number and current insurance certificates
A timeline by stage
Payment terms compatible with draws
A contingency line
Prior projects of similar type and size, with addresses if possible

Having these before you call shortens everything, because it is the same package that supports the loan, the draw schedule, and eventually the draw requests themselves.

Run the numbers with the real bid in them using the deal calculators. When the deal clears, send it over.

Common questions

What does a lender want to see in a contractor bid?: An itemised scope by trade with quantities and prices, on the contractor's letterhead, with their licence and insurance details, a timeline, and payment terms that match a draw structure rather than requiring large deposits.
Do lenders check the contractor?: Yes. Licence status, insurance including workers compensation and general liability, and whether they have completed projects of this type and size. Bids get reviewed before close rather than after.
Can you use your own crew or do the work yourself?: Often, on smaller scopes, with a properly itemised budget and realistic pricing for your own labour. Structural, electrical, plumbing and anything requiring a permit generally need a licensed trade.
Why would a lender reject a contractor bid?: Lump sums with no breakdown, pricing well below what the scope can be delivered for, no licence or lapsed insurance, or a payment schedule demanding most of the money before work begins.

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