When is a house sold subject to contract and what does this even mean?
When is a house sold subject to contract this means that an offer has been accepted and both parties (buyer and seller) are hopefully working towards an exchange of contracts. This is the point at which the deposit is paid (usually around 10%). At this point the contract becomes legal and binding. If the buyer pulls out at this stage they are liable to be in breach of contract and will forfeit the deposit. This applies to Property Law in England and Wales. In Scotland as soon as a buyer puts an offer in, it becomes legal and binding. Another question we get asked a lot is whats the difference between under offer and sold subject to contract, for more information this follow the link.
Up to one third of sales never actually go through. This could be for a variety of reasons – the survey highlights some major issues, the local searches throw up some information that gives the buyer cold feet or the chain falls through meaning the seller can’t move. From a buyer’s perspective, it does mean that it’s a good tip not to ignore properties that are Sold Subject to Contract (SSTC) when looking for a property to buy. So when is a house sold subject to contract?
When you drive by a property and see a sign that says, “Sold Subject to Contract” or see those words next to the picture of a property on an estate agent’s website, it means that someone has agreed to take the property but has not yet signed the contract or finished the legal paperwork. It is, therefore, an informal agreement so either party can still pull out.
If the house/property is SSTC and someone else comes along with a higher offer, they are perfectly entitled to do so and the buyer who at first had their bid accepted, can do nothing about it unless they, too, put in a higher offer or if they are in a stronger position as they are a cash buyer or not in a chain. The seller, at this stage, is still perfectly within their rights to pull out.
Gazumping, although frowned upon, is not illegal and is more commonplace when the property market is heating up as demand outstrips supply. Overseas cash buyers are quite brazen and equally determined to get the property they want and will have no qualms about putting in a higher offer and making sure they have their solicitor on hand straight away to conclude the deal as quickly as possible. This is happening more and more in London at the moment, for example.
It typically takes about 6-8 weeks to exchange contracts. During this stage the buyer arranges their finances and makes sure they have secured mortgage finance, instructs a solicitor and commissions any surveys that are required. If the sale fails to proceed to exchange and completion, it can leave the seller very frustrated as they will feel that they will have wasted quite a few weeks in the mistaken belief that they have sold the house when in fact they haven’t! This means that the seller will be very motivated to do a deal with the next buyer that comes along and that’s why it’s always worth enquiring about SSTC properties to see what the state of play is.
If you think about the statistics that one in three properties fail to sell, then for every three SSTC properties you enquire about, it is likely that one may still become available and if, by this time, you have arranged your finances you could be in a very strong position to make an offer and possibly even snap up a better bargain.
We hope that explains a little more about when is a house sold subject to contract? What are your thoughts please comment below.