When buying and selling properties, Sold Subject to Contract is a phrase you will come across a lot. Knowing what it means, how it impacts buyers and sellers and where it might go wrong are some of the things you should know. Never heard of it before? Don’t know what to do if you get ‘gazumped’? Don’t worry, we have the answers you need, all in one place.
If you’re looking for something specific, this menu will help you find your answer…
- What does Sold Subject to Contract mean?
- What does Under Offer mean? What’s the difference between Under Offer and Sold Subject to Contract?
- What does Sold Subject to Contract mean for the buyer? And seller?
- What happens after Sold Subject to Contract? Is the deal guaranteed to go through?
- Can I still view and place an offer on a house Sold Subject to Contract?
- What is ‘gazumping’? How can I avoid it?
- Can estate agents tell you about other offers?
- Is Sold Subject to Contract beneficial?
What does Sold Subject to Contract mean?
Sold Subject to Contract, or SSTC for short, basically means a formal offer has been made on a property and the seller has accepted it. At this stage, there has been no contracts or paperwork signed and so there’s nothing to legally bind the deal, and either party could decide to pull out without losing any money. Essentially, both parties have ‘shaken hands’ on a deal. Another expression that you may see used is ‘Sale Agreed’, which is just another way of saying SSTC.
Sold Subject to Contract is a term you won’t come across in Scotland. This is because if an offer has been made on a property, once accepted it becomes legally binding. As a result, SSTC is a stage that doesn’t exist at all in Scotland.
What does Under Offer mean?
‘Under offer’ means that a formal offer has been made by a buyer, but it isn’t confirmed whether or not the seller has accepted or declined. Estate agents generally use this phrase as a marketing tactic, to show that there’s formal interest in a property and so will force a sense of urgency into other interested parties to also submit a formal offer.
So, what’s the difference between Under Offer and SSTC?
The difference is with ‘Under offer’ it isn’t known whether or not the seller has accepted the offer but with SSTC, the seller has accepted and both parties are working towards an exchange of contracts.
What does Sold Subject to Contract mean for the buyer?
As a buyer, once you have had an offer accepted and the property has moved to SSTC, it is harder for other buyers to find it online. For example, on Rightmove buyers have to tick a box to be able to see the properties that are SSTC. As a result of having to tick a box, less people will see the property and therefore there’s a lower chance of someone coming along, putting in a higher offer (phew). Once you move to the SSTC stage, you’re able to apply for a mortgage, appoint solicitors and find a surveyor.
And the seller?
Moving to the SSTC stage means your estate agent has checked your buyer’s details and proof of funds and so you can choose a solicitor to start the legal process of transferring the ownership of the property. This then means you’re in a stronger position to place an offer on a house you want to purchase, if you haven’t already done so.
What happens after Sold Subject to Contract?
After SSTC, both parties are working towards an exchange of contracts at which the sale becomes legal binding, and the buyer puts down a deposit (which is generally between 5-10%). This means if either party were to pull out, they’re breaching their contract and would face a financial consequence. For example, if after the contracts are exchanged and the buyer decides to pull out, then they will lose their deposit. On average, it takes about 9 weeks for a deal to go from SSTC to exchange (The Advisory).
Is the deal guaranteed to go through?
Sadly, even if the property is SSTC, there’s no guarantee the sale will go through, as it’s still an informal agreement (annoying I know). In 2019, it was reported 25% of house sales fell through after SSTC (according to Which?). There are various reasons a sale may not got through and we’ve compiled a list, so you know what to look out for:
- Seller changes their mind and takes the property off the market.
- Buyer changes their mind and withdraws their offer.
- The mortgage valuation is lower than the accepted offer. This means the lender has valued the property at a lower value than the accepted offer, and so isn’t willing to lend the funds, meaning the buyer can’t get a mortgage and therefore has to pull out of the sale. However, should this be the case, the buyer can go to the seller to try negotiate on price, to try stop the sale from falling through.
- You have a ‘chain break’. A ‘chain’ refers to when buyers and sellers are linked together due to house sales, meaning each one is reliant on the other’s sales going through. For a chain break to occur, one part of the chain will pull out from their sale, causing a ripple effect. For example, if your buyer pulls out, you no longer have anyone to sell your house to and will mean you have to withdraw from your purchase.
- You are ‘gazumped’. We are going to cover this later, so we’ll leave this here for now.
- The survey shows major problems. This could be roofing problems, damp, drainage issues etc. which often take large amounts of money to fix. If the seller isn’t willing to fix these problems or move on the sold price, then this often causes a sale to fall through (noooo).
So, can I still view and place an offer on a house Sold Subject to Contract?
If you’re looking for the short answer then yes, you can. As we’ve already discussed, SSTC isn’t legally binding and the seller has every right to leave their house on the market, allowing in further viewings and potentially further offers. If the seller chooses to accept another offer in place of yours, as they see it as a better offer, this is known as ‘gazumping’. Not quite clear on this? Don’t worry, direct your eyes down to the next section and all will be revealed!
As mentioned earlier, SSTC doesn’t exist in Scotland and so once an offer has been accepted on a house, you will not be able to view it or place an offer yourself.
What is ‘gazumping’?
As SSTC is nothing more than an informal agreement, another buyer could come in and place a higher offer, which the seller has every right to accept, even though they’ve previously accepted a different offer. This is known as ‘gazumping’ or being ‘gazumped’. Although it’s not illegal, gazumping is often looked on as unfair and immoral but this view won’t be enough to stop a determined buyer. Gazumping is more likely to happen in a highly competitive market or a highly sought-after area (oooo). As a buyer, if you’re not able to submit a higher offer to counter the other offer, gazumping will leave you a little stuck. However, there are a few things you can do, as a buyer, to help minimize the risk:
- Ask to take the property off the market – this is something you can include as a condition of your offer. You can ask the estate agent of the seller to remove the property from the market once your offer is accepted. However, the seller can accept your offer but not agree to taking the property off the market.
- Reassure the seller of your position – this is something you can do to assure them you’re a trustworthy buyer. If the seller trusts you, they’re less likely to be as open to other offers, as they don’t know for sure that if they accept another offer, the other sale will go through. This means the seller must weigh up the risk of losing a trustworthy seller over the potential gain of selling their house at a higher price.
- Be open to movement – if you find out you’re being gazumped, you should be open to speak with the seller and listen to the other offer they have received. If you’re able to increase your offer to match this offer or get closer to it, the seller is more likely to want to stick with you, especially if you’re already a considerable way through the process.
- Try to ensure the process is as fast as possible – the quicker the process, the less chance you have of being gazumped. You can appoint fast solicitors, a good surveyor and get a mortgage ASAP, as soon as your offer has been accepted. This will allow the process to move fast and get you the quickest possible sale.
So, can estate agents tell you about other offers?
If you’ve decided, even though a house says SSTC, you’re desperate to snap it up and get in a better offer then you may want to know if an estate agent will be able to tell you the accepted offer. Legally, estate agents are not allowed to tell you how much the accepted offer is. However, they’re able to give you a guide on whether it’s close to the asking price, allowing you to make your own judgment and submit your own offer. Of course, when submitting your offer to the estate agents, they may tell you it’s likely to be rejected, suggesting it’s lower than the already accepted offer.
Is Sold Subject to Contract?
In short, yes there are benefits of SSTC to both parties. It would be pretty pointless existing if there wasn’t! It gives both buyers and sellers time to decide the sale is definitely right before it becomes legally binding. It also gives time for negotiation if any issues are picked up in the survey which, if major, may affect the price that the buyer is willing to pay. This period gives time for both parties to negotiate and get to a stage at which they’re both happy to complete the sale.
Got more questions or some insight to give? Get in touch with us and let us know what you think!