Ever seen “Sold Subject to Contract” (SSTC) written by a property listing and wondered what it means? We’ve teamed up with our partners at AVRillo, a leading UK conveyancing firm, to explain what SSTC means for buyers and sellers.
What does SSTC mean?
SSTC, which stands for Sold Subject to Contract, means the seller of a property has accepted a buyer’s offer but the paperwork and legal bits aren’t complete yet. No money has changed hands, nothing is legally binding, the price can still be changed and renegotiated, and the buyer and seller can still pull out.
What does SSTC mean to the outside world?
Outside of the parties involved in the transaction, SSTC shows other potential buyers who may find the property during the SSTC period that an offer has been accepted on the property and both the buyer and seller have instructed solicitors to complete the deal.
Is the sale guaranteed to go through when a property is SSTC?
The simple answer to this question is no. Anybody can pull out of the transaction and this is as common as one in three sales falling through during the SSTC period.
The buyer and seller can both pull out when a property is SSTC because the parties aren’t legally bound yet. The deal is only legally bound on exchange of contracts unless you’re buying in Scotland, where an offer would be legally binding.
Can you reduce the risk of a sale falling through?
Completing the sale quickly is the best way to ensure its success. Some tips for completing your purchase efficiently during the SSTC stage can be found below…
1. If you’re the seller, appoint a conveyancer as soon as your estate agent puts your property on the market
Only once the conveyancers for both the buyer and seller are appointed and the buyer proves their source of funds will the estate agent change the status of the property from “For Sale” to “SSTC”. Appointing your solicitor straight away as the seller will mean you’re already ahead and will allow for the conveyancing process to start quickly once your buyer has also instructed theirs.
You may understandably be worried about spending legal costs before a buyer is found, however, there are award-winning conveyancers out there who won’t ask you to pay a deposit towards their costs upfront and will start working for you straight away.
2. Use a sale-ready pack to cut down risk, time, and wasted costs
Your conveyancer can prepare a sale-ready pack when your property goes on the market. This is optional in England and Wales but mandatory in Scotland and is known to reduce fall throughs and save money. In Scotland, all offers are legally binding if accepted as a Home Report is used and available to view once a property comes to market. The Government and National Trading Standards now encourage disclosing upfront material information before a property is SSTC.
Using a sale-ready pack means solutions can be gathered early for any missing information and documentation identified in the sale-ready pack as problematic which will help reduce delays later on and things going wrong when an offer is accepted.
3. Consider reservation agreements combined with SSTC
If you’re particularly worried about a possible collapsing transaction, as a buyer or seller you can instruct your conveyancer to draw an exclusivity agreement for a fee, often referred to as a reservation fee. This secures no interruptions with other offers in return for a specific timeframe for exchange.
4. As a buyer, get yourself qualified by the estate agent
Getting qualified as a buyer gives you the best chance of your offer standing out against other prospective buyers. It makes you more attractive as it isn’t always the highest offer that secures the sale and being a qualified buyer reduces the risk of the sale falling through during SSTC.
To qualify yourself as a buyer, speak to a mortgage broker to get a Mortgage Decision or Agreement in Principle to understand how much you can borrow so you can prove to the seller and the estate agent that you’re capable of getting through to completion.
Remember to also do your calculations to show you’re in a position to not only pay the agreed purchase price but also stamp duty, legal costs, third-party disbursements, and removal costs. It’s also important to prove that all your purchase funds pass AML (UK anti-money laundering legislation) checks.
What happens during the SSTC stage?
When a property is SSTC, the buyer’s conveyancer carries out a legal investigation into the legal title of the property. They look for problems and try to provide practical solutions, if possible, to ensure the property can be punched with good title, meaning the buyer can re-mortgage or sell in the future.
To do this, the buyer’s conveyancer will apply for searches such as Local Authority, Water Drainage, Contamination, Flood, and others depending on the property, to look for potential issues. The buyer’s conveyancer will also examine the Land Registry’s legal deeds and draft a contract and supporting documents. These can be produced in a sale-ready pack which is why it’s worth ordering one early to reduce risk.
The buyer’s conveyancer will also need to review the forms completed by the seller’s conveyancer, including the TA6 property information form, leasehold form and lease management on a lease sale. Once reviewed, the buyer’s conveyancer will raise “additional enquiries” with the seller’s solicitor and consider if fixed or indemnity insurance for defects are available.
A ‘report on title’ will be sent to the buyer towards the end of the SSTC period. Once reviewed, the buyer decides whether to buy or not. If yes, they’ll instruct lawyers to exchange legal contracts. The seller and the buyer must agree on matters such as the time between the exchange and completion of contracts. The Law Society contract of sale, used in conveyancing, makes it a special contract term of 20 working days. However, sellers and buyers who want to prioritise their move can ask their conveyancers if they’re prepared to expedite this time from five to 15 working days between exchange and completion.
Can the sale price be renegotiated during SSTC?
Yes, if problems come up. This is also why a sale-ready pack is helpful because getting legally ready before the SSTC stage means disclosing material information upfront and adjusts the price upfront.
Price renegotiations can still happen if issues are flagged during the SSTC stage, for example, during a surveyor’s report, such as dampness, poor works such as faulty electrical wiring, unsafe alterations, and even hidden structural damage and subsidence. Other price renegotiations could result from the legal investigation report flagged by the buyer’s conveyancer, such as missing tithe documentation, which makes the property legally defective.
Can a seller still allow viewings on their SSTC property?
Yes, however, if you’re the seller, allowing viewings while your property is SSTC can be risky. There have been instances where buyers have become aware of the situation and pulled out.
What’s gazumping?
If a buyer finds a property they love that’s SSTC, they can call the agent to discuss the property and the strength of the current offer and there’s the opportunity for them present an offer at this stage. Should another offer be made, the estate agent is legally obliged to relay any offers they receive to the seller unless instructed otherwise by the seller. If the seller accepts a new offer, this is known as gazumping.
When does the SSTC period end?
It ends on completion of the transaction. The SSTC period can take five months on average from an offer being accepted to an exchange of legal contracts, and between five to 20 more working days to completion. This varies according to factors such as the resources of your conveyancer and whether they can cover your work in a reasonable time as many are busy. It can also depend on how busy the market is and the time of year, for example spring and autumn can be busier months. The SSTC stage ends once the final contract has been signed and exchanged and the deposit is paid. At this point, the deal is legally binding, so anyone that pulls out would incur large fees.
Content provided by OnTheMarket.com is for information purposes only. Independent and professional advice should be taken before buying, selling, letting or renting property, or buying financial products.
