When the time comes to sell your house, putting it up in a raffle may not be your first point of call, but it’s a method of sale that’s gaining in popularity in spite of warnings from the gambling commision that it might be against the law. Tom Hutchinson of risk management company Team Umbrella weighs up the pros and cons.
Selling a house in modern times is in many ways harder than ever before. With so much to think about: market price, bidding wars, having the property taken off market, estate agents, mortgage advisors, conveyancing, surveying, removals, stamp duty, it’s no wonder that people find it a very difficult period.
Could the unconventional method of house raffling be the answer?
What is raffle ticket selling?
Selling a house via a raffle is quite simple and it makes good sense on paper.
Buyers answer a unique question (they have to, by gambling law) and then buy a raffle ticket to in the house that’s for sale.
The house in question may be valued around £500,000.
If 50,000 tickets are sold at just £10 pounds, then the seller has their house sold along with the amount set. The buyer has just bought a house for £10. So everyone’s happy.
It’s even possible that selling your house via a raffle is a great way to make even more money (i.e. Set the market price at £500,000; acquire £700,000 worth of tickets – equalling a £200,000 profit for you). Legally, however, you can only take the market price that you set.
Selling your house through a raffle
There are a number of things you need to consider before raffling your house off.
What sounds like an efficient way of selling off your property can still be novelty for buyers. House raffling is gaining traction in the housing market but it’s still a long way from being a mainstream option.
Plenty of potential buyers believe these raffles to be a scam, as they don’t believe that a raffle can genuinely be a viable method of purchasing a home.
Another consideration is the moving house fees: legal fees, stamp duty etc. should all be covered by price set. For example, if the price is valued at £350,000, it would probably be a good idea to set the raffle amount to £400,000 to cover these moving costs.
Another factor to consider, just like when purchasing, is the gambling laws. There are a lot more details to a raffle than you’d first think, especially a high-prize one. You need to be prepared to ask a skill question first, so it’s not lawfully similar to a lottery. You need to be able to fulfil the prize money to the winner even if the money raised is enough to make the sale. This is usually the case for a few house raffles and there have been many examples of cash winners, instead of a house.
There is no doubt that house raffles are becoming increasingly popular.
Even though there has not yet been a house raffle horror story, confidence in them is low.
Homeowners can lose money on running a house raffle, but it all depends on the set-up. The main loss is time. They might’ve sold the house in that same period through putting it on the market with an estate agent, however, this would cost them plenty more in house moving costs.
How reliable is a house raffle?
The UK Gambling Commission has warned the public against house raffling, stating: ‘Our concern is that we are seeing instances where organisers are breaking the law as their scheme has been set up in a way that means it is an illegal lottery.
‘I’m sure many will have seen in the media that some people have ‘raffled’ their home with some success. However, most of the schemes we are aware of have been operated as free draws or prize competitions, which are not caught as gambling under gambling laws.’
However, it’s unlikely that these sorts of statements will put house sellers off. The simplicity of the sale is more of a draw for people than any gambling issues that may arise out of such an operation.
The risk aspect is one of the main factors that draw people in. A lot of raffles that are ultimately unsuccessful end up giving away the money raised to the winning ticket. In most cases, this is usually a very large sum so the raffle is still worth it for those involved.
However, in case of any future legal proceedings, it is good practice to make sure your raffle is watertight for any gambling authorities.
Ultimately, house raffling is certainly legal when performed correctly. It is also a very attractive proposition when selling your house due to the money you save on house moving costs (estate agents, stamp duty etc.)
Should I sell my house via a raffle?
It is the finer details behind these competitions and transactions that are currently causing the most difficulties. Essentially, there are not enough concrete laws around this combination of raffles and selling a house to be properly regulated yet.
Ultimately, selling a house via a raffle can certainly be done, but the surface of ‘Win a House for £10!’ is not what you should be thinking about. You need to do your research. It’s certainly not as easy as you think.
This sector certainly needs more regulation, with new laws needed to be brought in to leverage house raffling as a truly viable method of selling a house. The market is certainly crying out for one.