Fix and Flip: 8 Document Checks Before You Close and Before You Start

You find a house at a good price. The numbers work on paper: purchase, renovation, carrying costs, resale, a margin you can live with. A contractor walks the property, sends a two-page estimate within a day, and the start date is next week. Your inspection window closes on Friday.

Six weeks later the estimate has grown, an inspector has asked for a permit nobody applied for, and the kitchen you pictured in the listing photos is not what the scope describes. None of this was hidden. It was all in the documents, and nobody read them against each other. Here are eight checks to run, ideally before you close and in any case before you sign a contract.

1. Scope against your intended finished product

Start from the end. Write down what the finished property must be: number of bedrooms and bathrooms, kitchen specification, flooring, finish level, exterior work, mechanical systems. Then read the contractor's scope line by line and mark every item that does not match.

• What to look for: vague verbs such as "update", "refresh" or "repair as needed", and finishes described by trade names only.
• What it means: anything not stated in the scope is open to interpretation, and the interpretation usually favours the person who is not paying.
• What to ask: "Where in this document is the item that appears in my finish list?" If the answer is "it's implied", get it written down.

2. Line items and allowances

A lump sum with three or four headings tells you almost nothing. A usable estimate breaks the work into trades and quantities: demolition, framing, electrical, plumbing, drywall, flooring, paint, and so on, each with a unit, a quantity and a price.

Pay particular attention to allowances. An allowance is a placeholder amount for something not yet selected, typically tile, fixtures, cabinets or appliances. If the allowance is set below what the finish level in your resale plan actually costs, the difference comes back to you as an overrun later, even though the contract total never changed on paper.

• List every allowance and its amount.
• Compare each against a realistic price for the finish you intend to sell with.
• Check what is excluded: disposal, site protection, cleaning, delivery, sales tax, contingency for hidden conditions.
• Look for items that appear twice under different headings, and for items that do not appear at all.

3. Permits and unpermitted work

Requirements differ by city, county, province and state, so confirm them with the local building department rather than relying on a contractor's assurance. As a general rule, structural changes, new or relocated plumbing and electrical, mechanical replacements, and additions or conversions commonly require permits.

Two separate questions matter here. First: which of the planned works need a permit, and who pulls it? The contract should name the party responsible and state that the contractor will not start regulated work without it. Second: is there existing unpermitted work in the property you are about to buy? Finished basements, converted garages and added bathrooms are typical examples. Ask for the permit history, compare it with what you see on site, and treat any gap as a cost or a negotiating point before closing, not after.

4. Payment schedule tied to progress

The schedule should follow completed, verifiable work, not the calendar and not the contractor's cash needs. A large deposit followed by payments on dates rather than milestones leaves you paying ahead of the work.

1. Keep any initial payment modest and tied to a stated purpose, such as mobilization or a material order.
2. Define each payment trigger by a physical result: rough-in complete and inspected, drywall hung, cabinets installed.
3. Hold back a final portion until the punch list is finished and closing documents are delivered.
4. Require an itemized payment request and, where your jurisdiction uses them, lien waivers with each payment.

Many contractors use a structured pay application with a schedule of values. Whatever the format, each request should show the contract amount, the work completed to date, and what remains.

5. Change-order rules

Change orders are where a flip's margin is most often lost, because they arrive during the work, when you are under time pressure and have little leverage. The contract should settle the rules in advance.

• No extra work is paid unless a written change order is signed before the work is done.
• Each change order states the price, the schedule effect and the revised completion date.
• Pricing for additions follows a stated method, such as cost plus a fixed, agreed markup, and not a figure set after the fact.
• Hidden conditions, such as rot, outdated wiring or damaged piping, are handled by an agreed unit price or a process for approval, not by open-ended discretion.

Also decide who may authorize changes on your side. If your agent, partner or property manager can approve extras by text message, the clause does not protect you.

6. Licensing and insurance

Verify the contractor's licence with the issuing authority where one is required, and check that it covers the type of work in the scope. Ask for current certificates of insurance, and confirm the policy dates, the coverage types and the named parties. General liability and workers' compensation coverage are the usual starting points; the required forms and limits depend on where you are.

Do the same for subcontractors, or require in the contract that the contractor carry responsibility for them. If an uninsured worker is injured on a property you own, the consequences do not stay with the contractor.

7. Timeline and carrying costs

A flip is a race against carrying costs: loan interest, taxes, insurance, utilities and any lender fees. Every week of delay has a price, so the timeline belongs in the contract and not only in conversation.

Work out your weekly carrying cost and put it next to the schedule. Then check:

• Does the contract state a start date and a completion date, or only a duration?
• What counts as a valid reason for extension, and who proves it?
• Is there a remedy for unexcused delay, such as agreed daily damages?
• Are inspections, material lead times and permit waiting periods reflected in the schedule?

A realistic schedule that includes inspection waits is more useful than an optimistic one that ignores them.

8. Exit and resale documentation

The project is not finished when the paint is dry. A buyer, a buyer's lender or a buyer's inspector will ask for evidence that the work was done properly, and the contract should oblige the contractor to deliver it.

• Permits closed or finaled, with inspection sign-offs, and a certificate of occupancy or equivalent where applicable.
• Manufacturer and installer warranties for roofing, windows, appliances and mechanical equipment, transferable where possible.
• Final lien waivers or the equivalent release documents from the contractor and major subcontractors.
• Product and finish information for maintenance, and a copy of the final as-built scope.

Tie the last payment to delivery of this package. After the contractor has been paid in full, it is much harder to obtain.

Where an independent document review fits

Most of the problems above are visible on paper. They go unnoticed because the same person who needs the deal to close is also reading the documents, usually in a hurry. A second review of the estimate and scope puts a different reader on the same pages: someone who checks quantities and line items for gaps and duplication, compares the scope with the intended result, and flags contract terms that leave your margin exposed.

MEXUM is a service that reviews design, cost and contract documents and returns a reasoned conclusion as a PDF within 48 hours. That is fast enough to fit inside a typical due-diligence window. It does not replace your lender, your engineer, your inspector or your lawyer. Its purpose is narrower: to give you a documented list of questions to put to the contractor before you commit money, so that the answers are in the contract and not in your memory.

This article is general information, not legal or financial advice; check the requirements that apply in your jurisdiction and consult qualified professionals for your specific project.

Frequently asked questions

What should I check in a contractor's estimate before starting a flip?

Look for a breakdown by trade with units, quantities and prices, not a lump sum with a few headings. List every allowance and compare it with a realistic price for the finish you plan to sell with. Check what is excluded, such as disposal or cleaning, and look for items that appear twice or not at all.

Why do allowances in a renovation contract cause overruns?

An allowance is a placeholder amount for something not yet selected, such as tile, fixtures, cabinets or appliances. If it is set below what your intended finish level actually costs, the difference comes back to you as an overrun later, even though the contract total did not change on paper.

How should payments to a flip contractor be structured?

The schedule should follow completed, verifiable work rather than the calendar. Keep any initial payment modest and tied to a stated purpose, define each trigger by a physical result such as rough-in inspected, and hold back a final portion until the punch list and closing documents are delivered. Request itemized payment requests, and lien waivers where used locally.

What documents do I need from the contractor to resell a flipped house?

A buyer, their lender or inspector will ask for evidence the work was done properly. The article lists closed or finaled permits with inspection sign-offs, transferable warranties, final lien waivers or equivalent releases, and product and finish information with the final scope. Tying the last payment to delivering this package is suggested.