26 March, 2018
Look closely at a ‘sold’ property sign in the UK and you may see a few additional words in much smaller type underneath - ‘subject to contract’ or ‘STC’. It’s one of several potentially confusing terms you might come across relating to the sale of a property, but it’s an important caveat to understand.
Essentially, sold subject to contract means that an offer has been made on a property and that the seller has accepted it. So far though, this is just a verbal agreement; the paperwork is not yet complete and no money has yet changed hands. As such, the sale is not yet legally binding – and therefore it is ‘subject to contract’. You might also see the terms ‘sale agreed’ or ‘under offer’; these all mean the same thing.
The sold STC stage is a common part of the property sale process in most of the UK, and certainly in Wokingham and Crowthorne where we work, but there is no such stage in Scotland. There, once an offer on a property is accepted, it is enforceable by law.
So, there’s a chance a property that’s sold STC won’t actually sell?
That’s right. At the sold STC stage, a house sale can still fall through, for example, due to issues flagged by the valuation survey, or because the buyer or seller changes their mind. In the first quarter of 2017, one in three house sales across England and Wales fell through before completion.
This may sound scary, but a house sale that fails to reach completion needn’t be the end of the world. The most important thing is that a sale is right for both the buyer and the seller, so if something non-negotiable arises that means that’s no longer the case, it’s always better to look for another buyer rather than trying to force the sale.
What does sold STC mean for a seller?
When you receive and accept an offer on your property from a prospective buyer, it is now sold STC. Your property listing will be removed from or updated as sold STC on your estate agent’s and other property websites, and a ‘Sold’ or ‘Sold STC’ sign will replace the ‘For Sale’ one outside your home.
Alongside your buyer’s solicitor, your solicitor will start the legal process of transferring ownership, which will likely include answering a number of questions about your property from the buyer’s side.
What does sold STC mean for a buyer?
Once you have made an offer on a property and it has been accepted by the seller, it is now time to finalise your mortgage and instruct your solicitor to organise the searches and surveys and find out anything about the property you don’t already know on your behalf. Essentially, this stage is a chance to make sure you are fully-informed and happy with every aspect of the property you are about to buy, before the sale becomes legally binding.
In many house sales, there is a lot of information and associated paperwork to transfer, so this process can be a lengthy and uncertain time for both parties. Your estate agent and solicitor should both ensure you are kept up to date with progress as it’s made.
If a house sale is STC, is there anything to stop other another buyer making an offer?
Unfortunately, no. This is sometimes known as ‘gazumping’ and while it’s widely frowned upon as unfair and unethical, it’s not illegal.
If another buyer comes across a property that is sold subject to contract, there is nothing to prevent them calling up the estate agent to find out about the property and the strength of the offer. They can be kept on file by the agent so that if the sale were to fall through, they would be first in line to make a new offer.
Depending on the seller, there may also be the opportunity for another buyer to go in with a higher offer during the sold STC stage. If this happens, the seller’s agent is legally obliged to tell the seller about the higher offer. Having said this though, it would be very unlikely that a seller would seriously consider an offer from a buyer who hadn’t seen the property when it was open for viewings. So, realistically speaking, the chances of being gazumped by a buyer who hadn’t already had the chance to make an offer when the property was still being marketed are very slim.
This is why taking a home off the market after an offer has been accepted is so important; it prevents the further viewings that could lead to additional offers. It’s the reason we always recommend that a seller shows commitment to the sale by taking their property off the market once we have verified that the buyer is all set to make good on their offer.
However, if a seller was to accept a higher offer from a new buyer, the original buyer will lose any money they’ve spent on surveys and searches, as well as the property itself of course. Gazumping tends to be more prevalent in a seller's market, in which there are more buyers than properties, and the seller can call the shots.
How can I avoid being gazumped?
As a buyer, there are steps you can take to minimise the risk of anyone else making an offer on the home you’re in the process of buying. As soon as your offer is accepted, discourage potential interest by making sure your seller’s estate agent takes the property off the market. As we’ve mentioned, they should remove or update any advertisements online, both on their website and any external property portals, and change the board outside the house from ‘For Sale’ to ‘Sold’. Speak to the estate agent immediately if this hasn’t been done.
If you feel like you’d like further reassurance, there is insurance available that can protect against financial loss in the event that the house sale falls through. For a fee, you can also ask a solicitor to draw up an exclusivity agreement; this ensures that as long as the contracts are exchanged within a specific time frame, the house is yours.
The sold STC stage is there to benefit both buyers and sellers
It can sound nerve-wracking, but it’s important to remember that the sold STC stage of a house sale exists so that all parties have time to ensure the transaction is right for everyone. The freedom to change your mind within the STC stage goes both ways; while it works for the seller, it also protects the buyer should any potential concerns be flagged in the survey, such as structural concerns or damp. It gives the buyer the chance to negotiate any issues into the price of the property, or to withdraw from the sale if these issues are insurmountable.
Once both parties are satisfied with all the aspects of the sale, the STC stage ends with the signing and exchanging of contracts, and the setting of a date on which to hand over the keys. At this point, the buyer pays a deposit of 5% to 10% of the total agreed price and the sale becomes legally binding. There are large fees for anyone who pulls out of a sale after the exchanging of contracts, which means it’s highly unlikely.
Whether you’re selling or buying, a good estate agent should guide you through every step of the STC stage of a house sale. While we can’t say for sure how long it will take, we can and we will keep you informed as developments are made, so that you know your house sale is in safe hands. Talk to us today to find out more about how we can help you make your next move.