Optimising Real Estate Deals: Techniques For ‘SSTC’ Understanding In The UK
SSTC stands for ‘Sold Subject to Contract’ and is a term used frequently in the UK property market. When a property is marked as SSTC, it means that an offer has been made and accepted on the property, but contracts have not yet been exchanged. This creates a period where the property is technically still on the market, but any new offers will be considered as a ‘backup’ offer in case the original sale falls through.
What Does SSTC Mean in the UK and why is it important to understand the basics first? Being familiar with the SSTC process is key for optimising property deals as both a buyer and seller in the UK. Let us discuss this is more detail.
The SSTC Period in Detail
When a seller accepts an offer on their property, this kicks off the SSTC period before contracts are signed and exchanged. This usually lasts around 4-6 weeks but can be shorter or longer depending on the circumstances.
During this time, the buyer will arrange various surveys and valuations on the property. Things like mortgage valuations, building surveys and local authority searches will all take place. The buyer’s conveyancer will also make enquiries with the seller’s conveyancer about any issues impacting the property.
The buyer and seller are not legally committed to the sale until contracts have been signed and exchanged. Up until this point, either party can still pull out of the deal. This is why properties remain technically ‘on the market’ during the SSTC period, even if new offers will be treated as backup offers.
Why SSTC Exists
The SSTC process exists in the UK system to allow buyers time to conduct all necessary checks and surveys on the property before fully committing. This helps avoid situations where buyers end up committed to purchasing a property that turns out to have significant issues they were unaware of previously.
For sellers, the SSTC period can create uncertainty. However, it also presents an opportunity for them to continue marketing the property and potentially secure an even better offer before exchanging contracts with the original buyer.
Overall, the SSTC system aims to provide some protections and flexibility for both parties during what can be a lengthy conveyancing and mortgage process.
Can a Sale Fall Through During SSTC?
Yes, sales can fall through even after an offer has been accepted if problems arise during the SSTC period. Some key reasons this can happen include:
- Buyer’s Mortgage Falls Through – If the mortgage lender values the property lower than the offered price or declines the mortgage application, the buyer may have to withdraw their offer.
- Issues Revealed In Surveys – If the buyer’s building survey identifies serious problems like subsidence or dampness, they may wish to renegotiate or withdraw from the deal.
- Legal Title Problems – Issues that the conveyancers uncover around rights, boundaries, planning permissions etc can derail transactions.
- Chain Collapse – If there are related property sales higher up the buyer’s chain, they can impact the original SSTC deal going through.
- Change Of Circumstances – An unexpected job loss, relationship breakdown or other life event could force a buyer to pull out.
Around 90% of UK property sales will reach completion after going SSTC. However, both sellers and buyers need to appreciate that until contracts are exchanged, there’s no guarantee.
Can a Buyer Make an Offer While SSTC?
Legally, other potential buyers can still make offers on a property marked as SSTC, but in most cases, these will be treated as ‘backup offers’ rather than formal bids. Some key points around this include:
- The agent will usually inform new buyers making offers that the home is under offer already.
- The seller is not obligated to formally review or respond to new offers at this stage.
- However, the seller may choose to have informal discussions to assess if the new offer is significantly above the original agreed price.
- If the original sale does fall through, the seller can then quickly revert to any promising backup offers on file.
- Most agents will keep backup offers on record and contact potential buyers if the original sale collapses.
- Buyers should be aware their offer may languish as a backup for weeks until contracts are exchanged.
While there is no harm for buyers to make offers on SSTC properties, there is no guarantee they will be engaged fully by the agent and seller at that point. Maintaining open communication is key.
Can a Seller Change their Mind During SSTC?
During the SSTC period, the original offer that’s been accepted is not legally binding. This means the seller can technically still change their mind or accept a new offer up until the exchange of contracts, despite having agreed on one previously. There are some ethical and reputational factors around this, however:
- Most sellers will avoid ‘gazumping’ and progress the original SSTC offer as expected.
- Agents will also encourage sellers to stick to the original deal where possible.
- If a significantly higher offer does materialise, this may justify renegotiating or withdrawing from the initial offer.
- Withdrawing for a marginally better offer risks reputational damage and potential disputes.
- The practice of gazumping is frowned upon and agents/sellers may be wary of being seen to do this.
- Changing minds could mean compensating original buyers for sunk costs like surveys if they have acted in good faith.
While legally possible, going back on an agreed SSTC offer can damage reputations. Sellers and agents will usually only do so if a new buyer offers an exceptionally higher bid for the property.
How Long Should SSTC Last?
There is no fixed timescale for how long the SSTC period will last on a property. However, the typical timeframe is between 4-6 weeks between an offer being accepted and contracts being exchanged. Some circumstances where it may take longer include:
- First-time buyers need more time to arrange mortgages.
- New build properties with complex leasing setups.
- Chains with multiple buyers and sellers involved.
- Overseas buyers who need more time to travel and review paperwork.
- Major works are required on the property before completion.
- Buyer delays with booking or acting on surveys and valuations.
If an SSTC period goes beyond 8-10 weeks, it’s often an indicator that significant hold-ups or risks are developing. Savvy buyers spotting very lengthy SSTC times can potentially negotiate better deals.
Who Can View an SSTC Property?
When a property is under offer with the status ‘Sold Subject to Contract’, normal viewings and public open days will cease. However, there can still be some specific cases where people are allowed to view an SSTC property:
- Backup Offer Buyers – The seller’s agent may grant viewings to serious prospective buyers willing to make backup offers.
- The Original Buyer – Repeat viewings may be allowed for the buyer who has had the original offer accepted.
- Surveyors/Valuers – Professionals acting for the buyer can request access to conduct more detailed inspections.
- Conveyancers – Legal representatives may want to inspect the property and boundaries for conveyancing purposes.
- Tradespeople – Access could be given for trades preparing quotes for required work ahead of completion.
- Interior Designers – The buyer may want to bring a designer to discuss potential post-purchase refurbishments.
Aside from the above cases, most agents will advise that viewings are suspended once the SSTC status is in place. However, they can use their discretion around serious backup offers and related professionals.
Reserving a Property vs SSTC
Some buyers get confused between having an offer accepted on a property and ‘reserving’ a property. There are some key differences in the UK system:
- Reservation – Buyer pays a holding fee/deposit to take the property temporarily off the market while offer terms are negotiated. Not legally binding.
- SSTC – Buyer and seller have verbally agreed on a formal offer and sale price, but have not yet exchanged contracts. Legally non-binding.
- Reservations have a shorter time frame before formal offers need to be submitted. SSTC relates to an agreed post-offer period before contract exchange.
- Reservations give buyers exclusivity to submit their first offer. SSTC means an initial offer has been made and pricing is agreed in principle.
- Breaking a reservation only risks the initial holding fee. Ending an SSTC deal risks much greater sunk costs if surveys etc have begun.
- Reservations can only be made pre-offer. SSTC tags are applied after the initial offer process is complete between buyer and seller.
Understanding the distinction can help optimise deal strategies and negotiations for both buyers and sellers.
Withdrawing an Offer During SSTC
If unforeseen issues arise during the SSTC period, the original buyer may wish to withdraw their initial offer and pull out of the deal. Some key considerations around this:
- Up until contracts are exchanged, either party can withdraw from the deal without legal penalty.
- However, there may be some wasted costs already incurred by the buyer that the seller will expect recompensing for.
- The buyer should aim to give early notice if they may need to withdraw, rather than letting the SSTC period expire.
- Reasonable reasons like mortgage issues, lost jobs and illness are generally understandable to sellers.
- If the seller suspects the buyer got cold feet for no good reason, disputes could arise over compensation.
- A buyer with no intention to buy should avoid wasting everyone’s time and costs by not making offers.
- Agents will want to understand withdrawal reasons fully to avoid needlessly damaging the sale.
Withdrawing from an SSTC deal can happen, but buyers should aim to give notice promptly and explain reasons clearly to the seller to minimise disputes.
Can a Buyer Negotiate During SSTC?
There can still be some opportunities for buyers to negotiate down the price or request final fixes and repairs during the SSTC period in certain circumstances:
- If the original offer was the full asking price, a lower valuation from the mortgage lender may give scope to renegotiate
- Any major issues revealed in the surveys could justify requesting a price reduction from the seller to rectify them.
- Buyers may also request the seller address smaller repairs before completing them based on surveyor recommendations.
- If the original offer was below the asking price, more limited scope to negotiate down further unless serious issues were found.
- Negotiating stance will depend on local market conditions too – if rapidly slowing, more leverage to negotiate.
- Buyer requests need to be reasonable based on objective surveys and valuations by professionals.
- If the buyer negotiates too aggressively without justification, the seller can just abandon the deal.
While some negotiations can happen during SSTC, buyers need to ensure they have sound reasoning and realistic expectations when requesting changes to agreed deals.
The Risks of Gazumping in SSTC
Gazumping is when the seller withdraws from the agreed SSTC deal and accepts a higher new offer from another buyer before contracts are signed. This is legal but seen as unethical by many in the industry. Some key risks around gazumping for sellers include:
- Reputational Damage – seen as an unfair practice could hurt the seller’s future deals and relationship with agents.
- Disputes And Delays – the original buyer may pursue legal disputes and compensation that hold up the process.
- Agent Relationships Affected – agents want smooth sales and may discourage this disruptive practice.
- Other Buyers Put Off – prospective buyers on future deals may not trust the seller.
- Financial Complications – the original buyer may already have sunk costs into surveys, valuations etc.
- Backup Offers Fall Through – higher offers are not guaranteed and may also be withdrawn wasting more time.
Unless the new offer is exceptionally high, gazumping can have an overall detrimental impact on sellers. Maintaining a fair and ethical reputation is advisable for long-term market relationships.
Minimising Risks in the SSTC Period
There are some actions both buyers and sellers can take during the SSTC period to help minimise risks and keep deals progressing smoothly:
- Keep communicating with mortgage brokers and conveyancers to avoid delays in ordering surveys and paperwork.
- Double-check check no major works will compromise mortgage lending.
- Ensure a detailed structural survey is conducted by a reputable professional.
- Seek legal advice on any title deed issues that arise.
- Maintain dialogue with the agent and seller to resolve any emerging problems quickly.
- Have finance ready to complete the purchase on time once contracts are exchanged.
- Respond promptly and fully to any enquiries raised by the buyer’s conveyancer.
- Highlight any existing property issues early so buyers can factor them into negotiations.
- Keep property insured and avoid making any major changes during the SSTC period.
- Ensure the property is ready for move-in completion once the deal is completed.
- Stay in touch with agents and buyers if any issues arise that might impact the deal.
Following best practices during this period can help smooth the SSTC process for both parties.
Using SSTC Periods to Make Stronger Offers
Savvy buyers can optimise dealmaking by taking advantage of properties being in the SSTC status in some cases:
- Lengthy SSTC periods may indicate issues with the original sale, giving more leverage to negotiate.
- Can request buyers reports from the agent for a fuller picture of the existing offer.
- Opportunity to build a relationship with sellers/agents by lodging backup offers for the future.
- Avoid spending on surveys during SSTC and wait to see if the original sale falls through.
- Ask the seller to keep you posted if they do withdraw from the original deal.
- Be ready to move fast with stronger offer terms if the existing deal collapses.
- Consider offering the above asking price if you have budget flexibility.
With the right strategy, a property being SSTC can present opportunities for savvy buyers ready to move fast when opportunities arise.
- SSTC means an offer has been accepted but contracts have not yet been legally exchanged.
- This period allows buyers to conduct surveys before fully committing.
- However, either party can still withdraw during SSTC before the contract exchange.
- Backup offers can be made but may not be fully considered until the original sale collapses.
- Buyers and sellers should minimise risks during this uncertain period.
- Understanding SSTC helps optimise deal strategies for both buyers and sellers.
The SSTC period is a complex but critical phase of property deals in the UK. Having a fuller understanding of the process, risks and opportunities can help both buyers and sellers navigate this period effectively to achieve the best outcomes when transacting a property deal..