What is a housing raffle?
A housing raffle is exactly what it sounds like – instead of putting their property on the market with an estate agent, homeowners turn their flats and houses into raffle prizes. Entrants pay for a raffle ticket and then must answer a question to be in with a chance of winning it. Whoever buys a ticket and gets the question right will then be entered into a draw. And if you win, you get the house.
What’s good about them?
Housing raffles have started to gain popularity recently, thanks to a poor housing market and significant media attention. A successful raffle means, in the majority of cases, that homeowners can almost guarantee they’ll earn the value of the property back if they sell enough tickets, which they might have struggled to do otherwise in the current economic climate.
As housing prices are rising faster than wages, particularly in London, it can be incredibly hard for anyone to get on the property ladder. With millennials having such a slim chance of ever owning a home – it’s reported around one in three are destined to be life-long renters – this is a great way for them to ‘buy’ their first property.
And it seems in some cases housing raffles have worked pretty well – in August 2017, 51-year-old Marie Segal won a six-bedroom manor house in Lancashire worth £845,000 after buying a raffle ticket for just £2. Dustan Low, the owner of the property, was struggling to sell Melling Manor for a figure that matched the asking price. So he decided to raffle it off, selling just under 500,000 tickets for £2 each, and easily recovered the money he spent on the house, including stamp duty and legal fees, with people entering the draw from all over the world.
What’s wrong with them?
For sellers, there’s a very fine line between creating a harmless raffle and operating an illegal lottery. Last year the Gambling Commission issued a warning that well-meaning homeowners could be breaking the law by raffling off their houses if they don’t follow strict guidelines. According to Cliff Young, lotteries expert at the Gambling Commission, these rules are as follows:
- Lotteries and raffles cannot be created for commercial gain or profit: Lotteries are a form of gambling as they rely solely on luck, and therefore can only be run for good causes, such as charities and other non-profit organisations to support the work they do.
- A free draw or prize competition can be organised for profit: For example, a housing raffle is ok if it includes a quiz-style question. Without this question, raffling your house for profit is considered illegal.
- For a prize competition to be acceptable, there must be an element of skill: The question or puzzle must require some kind of knowledge or judgement that would prevent a proportion of people taking part from receiving the prize.
- Free draws can be organised commercially for private profit and benefit. However, there would have to be a free method of entry for participants.
If any of the rules are broken sellers can face severe penalties as a result, including 51 weeks imprisonment or a £5,000 fine.
Plus, there’s always a chance the homeowner won’t sell enough tickets, which has been the case with several housing raffles. Just last month a couple were forced to abandon their plans to raffle their £3,500,000 home because they didn’t sell enough £25 tickets. In June 2017, Shamus Fitzsimons was unable to sell the 250,000 tickets needed to make the money back on his £800,000 Scottish mansion, and instead gave out cash prizes and made a number of charitable donations, as most sellers tend to do.
And for the winner? Well, inheriting a house via a raffle could mean needing to complete significant work on the property that they weren’t previously aware of. New housing raffle site WinAbode.com was launched in late 2017 to host raffle houses on behalf of homeowners, but while they carry out preliminary searches and review the leasehold information, insurance and title documents, competition entrants are forbidden from viewing the properties before entering the raffles and must organise their own survey should they win.
Jake Russell, Director of estate agents Russell Simpson, told House Beautiful that housing raffles simply aren’t a feasible option for most people wanting to buy a home. “Before agreeing to buy a house, we highly recommend that you thoroughly inspect the property, as it could require costly repairs,” he said. “From the buyer's point of view, a lottery offers no assurances of them securing a home.”