There are some stressful situations we will all have to face in life. One that really tests people is selling a house. Selling a property can be difficult because there are so many factors which can affect a successful sale. Whilst many people assume that you have to sell your home using an estate agent, this simply isn’t true. Today there are many alternative options to choose from when selling your home.
It can be demoralising when you have a property that has sat on the market for months. Matters are only made worse when you miss out on the property of your dreams as a result. Some people are turning to property raffling to ensure their house is sold. However, winning a house for a price of a raffle ticket, is it too good to be true?
What is a property raffle?
Just like buying a raffle ticket at a school fete or charity function, the same principal applies to a house raffle. You buy one or more raffle tickets to give yourself a chance of winning a house. Once all of the tickets have been purchased the property seller will pick a winner. They have sold their house, estate agent free, and the winner gets to move into a new home for as little as a £5 raffle ticket.
Typically, the winner of the raffle will have stamp duty fees included in the prize in. state that, for raffled homes, Capital Gains Tax is based on the open market value on the date of attaining the property. This means that if the winner of the property raffle was to sell their current house immediately there would likely be no Capital Gains Tax to pay.
Why do people run property raffles?
Realistically there are few of us who can afford to buy an expensive country estate or a pricey penthouse in a trendy part of London. Our budgets simply don’t allow it. However, those raffling their properties are giving people the opportunity to live in such properties for as little as £5 a raffle ticket. Often people run house raffles that are marketed towards a certain demographic, usually related to income.
Many people who opt to raffle their house do so because they are having trouble selling it. More often than not, raffled homes are not your everyday three bed semidetached property. They tend to be grand, luxurious or trendy. They are not the everyday family home or single flat. Having a unique property can make it harder to sell, especially considering the often-hefty price tag.
Therefore, receiving a return on raffle tickets to cover your asking price whilst somebody wins their dream home seems like a faultless idea for some property owners desperate to sell up.
Property has been on the market for a long period of time
Issue selling property as it is unusual, luxurious or trendy
Property has a high market value, not many potential buyers
Guaranteed sale if process successful
Are house raffles legal?
If you want to sell your home via a house raffle you will need to be aware there are many hoops to jump through. You will need legal advice to make sure everything is permissible before going ahead. The Gambling Commission released a warning in 2007 that revealed some improperly organised raffles have gone against gambling laws. These raffles are referred to as illegal lotteries.
Granted, there are grey areas when it comes to property raffles. One of the main issues is the act of buying a ticket to win from a draw is classed legally as a lottery. Therefore, an individual raffling their house would need to apply for a license from the Gambling Commission and abide by strict regulations.
One-way people are dodging the Gabling Commission is by marketing their property raffle as a competition. People running prize raffles are asking those buying tickets a question before purchase. For example, answering ‘What style is the property built in?’ correctly would then allow the individual to purchase a ticket. In this instance the Gambling Commission would not need to be contacted as it is a competition as opposed to a lottery.
Another rule instated by the Gambling Commission is that property raffles should not be for financial gain; some of the money should go to charity or face legal consequences. However, with property prices so subjective many canny home rafflers are selling tickets that tot up to beyond the value of their property. This means they have sold raffle tickets that amount to over the market value of their home and will then donate the surplus money to charity.
Going against rules set out by the Gambling Commission could see people face a £5,000 fine and up to 51 weeks in jail as punishment.
What does the ASA say about raffles?
There are now a number of websites that can facilitate property raffles. It is therefore not surprising that the ASA has received complaints about some raffles or competitions. The Advertising Standards Authority website states;
“The ASA has investigated multiple ads for this type of promotion, and has found many in breach for changing closing dates or other terms and conditions, withholding the prize advertised or offering a significantly lower value cash prize, and omitting significant conditions.”
Raffles fall under the promotional marketing umbrella as this encapsulates both consumer and trade promotions, incentive schemes and the promotional elements of sponsorships. The ASA has a full list of rules and regulations available but some of the most prevalent are:
- Award the prize described, or a reasonable equivalent (8.15.1)
- Include a closing date and think before changing it (8.17.4)
- Consider whether you need to include a free entry route (8.17.2)
- Don’t mislead by omitting significant conditions
Is winning a house raffle realistic?
It must be remembered that property raffles are still relatively new and have only become popular over the last couple of years. Many people have never heard of raffling off their home and it is definitely not considered the norm when it comes to selling your home.
Whilst some expensive homes have successfully sold in raffles in the UK, most draws are met with lukewarm success. One issue many people struggle with is meeting the ticket quota. For example, if you wanted to make £600,000 on your property and were charging £5 a ticket you would have to sell 120,000 tickets.
Hypothetically speaking, if all the tickets sold and you purchased just one, you would have a 0.0008% chance of winning the house.
Are there any risks with property raffles?
Property raffles fail more than they succeed, it is the nature of the beast. Whilst appeasing the Gambling Commission can be a tricky area if you aren’t au fait with protocol, there are further risks associated with property raffles.
Pitfalls for the seller
Whilst you may drum up interest by dispensing raffle tickets for £5 a go to sell your property, who says you will sell the needed amount? Sellers have failed to sell enough tickets, meaning their properties go for far less than the market value or the plug is pulled on the raffle in total and people are refunded their tickets. However, sometimes sellers have been contractually obliged to honour their raffle prize and have had to let the winner move into their home whilst accepting a loss.
For example, if you want to sell your home for £750,000 you would need to sell 150,000 raffle tickets at £5 each to reach this amount.
Another area for concern is related to mortgages. If you still have a mortgage on your property a raffle might have to be reconsidered. They are typically more appropriate for a property with no mortgage. However, if you have a mortgage you will need to have a higher asking price to at least break even. If you do not break even you could face negative equity.
Downsides of property raffles for winners
Whilst winning an expensive property for very little money is the dream for many, you will need to consider the following upon winning:
- Stamp duty may still need to be paid
- Outstanding bills on the property
- Repairs and maintenance
- Remember, you won’t have completed a property survey
- Moving costs and stress
Furthermore, just like people avoid certain cars if the insurance would be too expensive, the same applies to houses. You may win a house for a couple of pounds, but will your salary be enough to cover elevated maintenance costs, more expensive bills and perhaps a longer commute? Bigger or more luxurious homes come with a larger monthly upkeep price tag.
Going ahead with a house raffle
If you ensure everything I legal and transparent a property raffle could be the selling option you were searching for. Going about a property raffle in the right way is integral to its success. Whilst it can be temping to see a raffle as a way of making above and beyond the market value of your house (as only you control the price and number of raffles tickets sold) it won’t pay to be greedy. Realistically, along with the value of your home you should factor in legal fees and other associated costs to break even.
As previously mentioned, lotteries are to be avoided unless you are willing to apply for a license which you may not be granted. The Gambling Commission should have no qualms with any competitions, however.
Transparency is key if you are to raffle your home. You will need anybody who buys a ticket to be 100% understanding in the process. It could be beneficial for you to seek legal advice so that the terms and conditions produced are appropriate and do not break any rules laid out by the Gambling Commission. They are also a great port of call for advice.
The future of house raffles
There is no denying that property raffles are becoming popular. Due to media coverage, newspapers are making the concept somewhat mainstream. A demographic particularly enthralled my house raffles are first-time buyers. Getting a foot on the property ladder is no easy task for the younger generation and the appeal of being in the mix to win a property for £5 is hard to ignore when you have little in the way of options. However, the Gambling Commission has warned ticket buyers to read the small print – some people are being duped out of their money due to legal issues or failure to sell enough tickets. Be savvy, if it’s too good to be true, it likely is.
Whether you would consider entering a property raffle in the future, we have put some top tips together to bear in mind just in case you do:
- Research the property listed for raffle
- Research the owners of the home up for raffle
- If the property is listed by a business or estate agent check them out thoroughly
- Does the listing look professional?
- Are there contact details?
- Check out the property on the Land Registry
- Check for any hidden costs
- Go over the terms and conditions in detail
Are house raffles worth your time?
Property raffles aren’t for everyone and they can be considered risky. They can also end up being significantly more complicated for both parties than initially assumed. For many people, the threat of legal implications and hidden expenses tend to put many people at both ends of the deal off, along with repayment issues and mortgage issues. If we are being honest, house raffles aren’t an easy option when it comes to selling your property.
If you want to sell your home and don’t fancy going down a more traditional route we can offer you a solution that is efficient and simple. If you’d like to have your home sold within seven days you can get a no-obligation cash offer from us today. Alternatively, if you’d like to find out more, browse our site or call us free on 080 231 6287 and one of our friendly team will be able to help you sell your property.