Wednesday, 7 January 2009

House Raffle fails

Yet another property raffle fails and another is launched

We have discussed before the pitfalls when raffling one’s house, but there seems to be an increasing trend despite the constant failures. Perhaps it is sheer desperation or perhaps as I mentioned earlier, sellers see it as a win, win situation. Either way, it has got me thinking again.

How about we start a company that runs property raffles, get approval from the various governing busy bodies, provide the raffle system and the website and take a percentage per ticket sold and perhaps a success fee if by some miracle the property actually makes its reserve in ticket sales. Apply a little more business logic to it, i.e. Higher ticket prices, transparency, better marketing etc. Reading the comments from my last post it was suggested that a company called prize home was already offering this service, but when I checked their website is down. Perhaps a gap in the market?

Just as an aside (and a rant), why shouldn’t I raffle my house if it is mine. If it isn’t mine, well surely it would up to the bank to complain. More nanny state, big brother interference. We will have health and safety knocking on the door next!

See you all in the Lotto que.

5 comments:

Araiji said...

I developed and directed a home raffle program for a major national nonprofit for ten years. During that time we raffled over 140 homes in 32 markets in 16 states. These are not easy, even with a strong brand behind the project. There are many moving parts and the marketing aspect is intense and costly. Much of the cost of our homes were defrayed through donations - we never paid full price for a home; in fact, several were fully donated.

It is also illegal for individuals to raffle their homes, regardless of the fact that the "proceeds" (after the owner gets his pound of flesh)go to a non profit. The charities themselves have to conduct the raffle. I think authorities are just not yet on top of this surge but soon will be.

Another factor to consider is that the winner would be faced with income tax on the prize (about 30%)for which he/she would most likely have to obtain a mortgage to pay in order to take possession of the property, property taxes, insurance, maintenance, association fees, etc. They would then have to either sell their existing home or the prize home, and in this market it is most difficult to sell any houses. Therefore, my question is simple - "Why would I want to be stuck with two homes with obligations that will undoubtedly create immediate negative cash flow?"

Keep the day job and leave these amateur house raffles alone.

Property Owl said...

Thanks Araiji. Wrong side of the pond however. We are in the UK and different regulaitons apply to lotteries, gaming and competitions. It strikes me that it is easier to achieve within the UK, but I take your point regarding general hassle.

JP said...

There are a few people looking into running such companies at the moment, as there are some considerable advantages to a traditional sale. The Gambling Commission seem to be taking something of an interest in people who try to do it in the UK and send a letter out to them, which is sometimes enough to warn them off.
The fact remains that it can be legal to dispose of a house (or other property such as cars, boats, holidays etc) by this means, providing that certain requirements are met.

RWallace said...

For anyone interested, there is now a book about home raffles titled, "The Home Raffle Book" and is located at www.thehomerafflebook.com. It's a must read for anyone conducting or participating in a home raffle including a sample business plan. One of the goals of the book is to help home owners make an informed decision as to whether or not raffling their home is for them.

Win a House team said...

Interesting post!

I have to agree with your comment about what seems like unnecessary interference. What's more is that having covered these house competitions on our website Win a House, one does get an overall impression of a regulator failing to do it's job (which for me would be to contribute to a clear, safe and predictable trading environment).

Actually, I believe Araiji's comment about the illegality of a non-charitable organisation or individual running a raffle or lottery is also true in the UK, to the extent that only local authorities and charities are allowed to organise unlicensed raffles or lotteries. A private organisation would need to be licensed by the Gambling Commission.

The other important and vague distinction is that between a game of skill and a lottery/raffle/draw. Skill-based competitions fall outside of the GA's remit.

However it is this blurry definition of what constitutes a sufficient level of skill exercised whilst entering the competition, which has caused so many competitions to be closed down by the GA. At times, this has allegedly happened after indicating that a competition was previously deemed compliant.

On top of that, the regulators position has also affected the payment processors, who have all been quick to distance themselves from any house competitions. In quite a number of cases the organisers' funds were unexpectedly frozen and their accounts locked.

So to an extent at least the regulatory environment hasn't been propitious at all.

Nonetheless, not everyone did their homework, and there indeed seems to be potential for someone to offer such services, and streamline it all.