One of many potentially confusing property jargon terms
Ever come across a property listing marked ‘Sold Subject to Contract’ (SSTC) and wondered what it means? In the maze of property market jargon, SSTC stands out as a key term. It implies that the seller has accepted an offer on the property, but the deal is not yet legally binding – the paperwork and legal formalities are still in progress.
The estate agent should take the property off the market, put up a ‘Sold: SSTC’ sign outside the property and describe the property in online listings as ‘Sold SSTC’. This stage of the property transaction doesn’t involve any exchange of funds and nothing is legally enforceable. The agreed price can still be negotiated, and both parties – buyer and seller – can back out.
THE PROCESS OF FINALISING THE DEAL IS IN MOTION
To those outside the immediate circle of the transaction, SSTC serves as a beacon. When potential buyers stumble upon the property during its SSTC phase, this informs them that an offer has been accepted and the process of finalising the deal is in motion. But is a sale guaranteed when a property is under the SSTC status? The simple answer is ‘no’.
With approximately one in three sales falling through during the SSTC phase, it’s clear that there are no guarantees. Both the buyer and seller retain the right to withdraw from the transaction since there are no legal obligations at this stage. The deal only becomes legally binding after the contract exchange, except in Scotland, where an accepted offer is legally binding.
MITIGATING THE RISK OF A FAILED SALE
One effective way to minimise the risk of a sale falling through is expediting the sale process.
Here are some strategies to ensure a smooth transaction during the SSTC phase:
EARLY APPOINTMENT OF A CONVEYANCER
As a seller, appoint a conveyancer when your property is put on the market. The estate agent will change the property status from ‘For Sale’ to ‘SSTC’ only after conveyancers are appointed for both parties and the buyer’s funds are verified. By appointing your solicitor early, you get a head start, enabling the conveyancing process to kickstart promptly once your buyer instructs their solicitor.
UTILISE A SALE-READY PACK
A sale-ready pack, prepared by your conveyancer, can significantly reduce risk, time and unnecessary costs. Although optional in England and Wales, it is mandatory in Scotland. This pack allows early identification and resolution of potential problems, thereby reducing the likelihood of delays later on.
CONSIDER RESERVATION AGREEMENTS
If you’re worried about the transaction falling through, ask your conveyancer to draft a reservation agreement or an ‘exclusivity agreement’. This ensures that the property won’t be subject to other offers within a specified time frame, providing some peace of mind.
GET PRE-QUALIFIED AS A BUYER
Get pre-qualified to make your offer more attractive compared to other potential buyers. This demonstrates your commitment and ability to complete the transaction, reducing the risk of a failed sale during the SSTC phase.
TRIGGERING A CHAIN OF LEGAL PROCEDURES
On achieving the SSTC status, a property sets off a chain of legal procedures led by the buyer’s conveyancer. This expert scrutinises the property’s legal title, unearths potential issues and offers practical solutions.
To identify potential problems, the conveyancer conducts various searches, including Local Authority, Water Drainage, Contamination and Flood. They also examine the legal deeds from the Land Registryand draft a contract along with supporting documents. These can be collated into a sale- ready pack, which is advisable to prepare early to mitigate risks.
PROBING QUERIES, REPORT ANALYSIS AND CONTRACT EXCHANGE
As part of the purchasing process, the buyer’s conveyancer meticulously scrutinises forms completed by the seller’s conveyancer. These include the TA6 property information form, leasehold form and lease management on a lease sale. After this review, ‘additional enquiries’ are raised with the seller’s solicitor by the buyer’s conveyancer. They also explore whether defects can be covered by fixed or indemnity insurance.
THE FINAL DECISION TOBUY OR NOT TO BUY
Towards the end of the SSTC period, the buyer receives a ‘report on title’. Their decision to proceed with the purchase hinges on this report. They instruct their legal team to exchange contracts if they decide to buy. Both parties must reach a consensus on details such as the timeline between contract exchange and completion.
PRICE RENEGOTIATION AND VIEWINGS DURING SSTC
While a property is under SSTC, issues that arise may trigger a renegotiation of the sale price. A pre-prepared sale-ready pack proves beneficial in these circumstances, as it allows for early price adjustments by disclosing crucial information beforehand.
POTENTIAL PITFALLS AND PRICE ADJUSTMENTS
However, problems identified during the SSTC stage, such as those highlighted in a surveyor’s report or legal investigation, can also instigate price renegotiations. Additionally, sellers can permit viewings of their SSTC property, but they risk potential buyers backing out.
UNPREDICTABILITY OF GAZUMPING
Gazumping throws another spanner in the works. This occurs when a new buyer makes an offer on a SSTC property, and the seller accepts this new bid. Unless the seller instructs otherwise, estate agents are legally obliged to pass on any offers they receive to the seller.
CONCLUDING THE SSTC PERIOD
The SSTC period culminates with the completion of the transaction. Typically, this process takes around five months, from accepting an offer to exchanging legal contracts. This is followed by a further five to twenty working days until completion.
FACTORS INFLUENCING THE SSTC TIMELINE
However, this timeline can fluctuate based on factors such as the conveyancer’s resources, market saturation and the time of year. The SSTC stage concludes once the final contract has been signed, exchanged and the deposit paid. The deal becomes legally binding at this point, with anyone withdrawing facing substantial penalties.
>> STILL PUZZLED OR NEED FURTHER INFORMATION? <<
Don’t hesitate to contact us for amore in-depth understanding of the mortgage and property buying process and how to navigate the SSTC phase effectively.
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