The Sad Truth About House Raffles

Readers of TrueGotham know how excited I have been about the apparant win-win-win formula that comes from raffling a house.  The owner gets out from under a mortgage, a charity benefits from the money raised above and beyond the mortgage  or appraised value amount, and the winner gets a home for the price of a raffle ticket.  I have absolutely acknowledged that the winner also has to pay taxes on the winnings but never dreamt that would be such an obstacle. 

First, I’m very sorry to report that it seems as if more than 90% of attempted house raffles have failed.  In Maryland where the SanMar raffle of a house in Hagerstown was a "success," the 10th house raffle of the year is being attempted and according to the Maryland secretary of state’s office only the one in Hagerstown, has been "successful" so far (via Washington Post). 

So what defines a successful house raffle.  In my opinion it would be where the mortgage is paid, the charity makes money and the winner can either afford the taxes on the winnings or sell the home for a profit above and beyond the tax liability.  So by that definiton, the Hagerstown raffle was NOT a success…at least not yet.  Check out this report on the SanMar raffle winner from WJZ-TV in Baltimore:

Kelly McPherson reports selling a house is getting tougher, even if you won the house for a $100 charity raffle.

That’s what happened to a Hagerstown man earlier this year, and now he’s stuck with a house he can’t sell to cover the costs of his win.

Who would have thought that winning a home in a charity raffle would turn out to be a curse?

"Up until last night, I never regretted buying the ticket. Now I’m a little worried," said Dennis Weaver.

A sad ending to what appeared to be a wonderful story.  With many housing markets across the country still in decline, the risk of winning a home that’s value can quickly become less than the tax liability may become a reality.  When I purchased my tickets for the Hagerstown home, I first saw it as an opportunity to help SanMar but I also thought that if I won, I would be able to sell the home for about $50,000 more than the taxes due.  Thank goodness I didn’t win!  Because of this tax issue, many are coming up with creative ways to circumvent this problem.

New Jersey resident and homeowner Jacquie Davies has come up with what may be an ingenius way to conduct home raffles without the burden of the tax liability on winnings.  On her web site ownahomefor100.com she asks that "entrants" pen a 50 word essay on what homeonership would mean to them and their family and send a $100 "gift" for the opportunity to be selected to purchase her home for $1.  It’s a very interesting design and she is donating part of the proceeds to Save The Animals Foundation.   I wish her the best of luck as she is even considering petitoning congress to change the laws regarding house raffles to enable more homeowners to avoid foreclosure. 

It remains to be seen if someone will develop a way to truly make the house raffle a win-win-win and a viable means for underwater homeowners to move on with their lives.

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37 Responses to The Sad Truth About House Raffles

  1. Ending up with a “white elephant” prize definitely doesn’t sound (or feel) like success, even though the raffle was run well and the non-profit reached their ticket sale goal.
    Living in Maryland, I’m very disappointed to see that the San mar isn’t ending well for the winner. With a 0% – 10% success rate to discourage the non-profits, and this article to discourage ticket buyers, we may not see 10 more house raffles next year!

  2. Hi Doug, wishing you a belated Happy New Year. I’m checking in with a progress report which hopefully will prompt you to write a little something on the happy truth about house raffles! The holidays didn’t help, but things are going pretty well all in all. If I could get TV/radio to pick up the story that would do the trick.
    I’m working on the Petition for Congress & I’ve had so many people e-mail me in support of the effort. If any of your readers has any tips for Petitioning Congress, please pass them on.
    As a side note, I’ve been beseiged by homeowners from all over the country aking me to do modified house raffles for their homes, so I’m in the process of setting some of these up as well.
    Thanks for your mention in True Gotham, I just wish the article had a different title!

  3. Since the real estate market has shifting from a sellers market to buyers market, hedging could have improved a real estate investment portfolio, if home owners had thought about this before the values of their properties dropped. This idea makes very good common sense… You can bet, If banks chose to do this, there is an advantage…

  4. avatar Glenna Price says:

    I am also interested in raffling a piece of property that I own in California. I own 3.28 acre parcel with a work/storage shop on the property and a well. I own the property outright, but cannot sell it for what I paid. If you could get the federal government to allow something like a raffle for homeowners that would be great and not have to join a charity in order to do this. Make it so the winner would not have to pay any taxes on the property until they sell it. Previous owner could use the winnings to pay off the bank to prevent a foreclosure.
    Look at all the money that the government has been throwing at large companies.

  5. avatar Toni says:

    Has anyone heard of Lakefront property being raffled successfully? (no house)
    My husband and I bought property about 2 years ago with the intentions of building a home. With the economy in shambles and my husband being a self-employed Drywall Contractor, we are struggling to make ends meet. No laws protect him from the thousands of dollars that builders owe his business and we have lost a years worth the income. If were were able to raffle the property and give proceeds to charity, it could save us from financial ruin.

  6. avatar Dana says:

    I was scammed by an internet job offer the week of January 15th, costing me $58,000 in charges against my bank account! I do not have that kind of money so I am forced to sell my beautiful log home in the foothills of the Mountains of Wyoming, any way I can (or file bankruptcy). The raffle tickets tied in with a contest is a great idea-just don’t know if I have 77 days. My question is are there laws governing selling tickets across state lines? And has anyone had luck selling by an auction??

  7. avatar Katrina says:

    Toni
    Where is the property located? We might want to buy.

  8. avatar Robert Burns says:

    Most successful raffles don’t actually end up turn over the house. The winner gets the choice of the house or a cash amount. Even that doesn’t guarantee success if it isn’t marketed well.
    If anyone wants to see a site that lists various raffles go to raffleindex.com

  9. avatar June says:

    I have a home in Puerto Rico with an apraised value at 185,000. It’s free and clear. Living in the house gives you an exemption of property taxes. I don’t believe that any other state offers you this. I need to sell due to must needed hip replacement and knee surgeries. I would like to know if anyone could help at trying to raffle this off.

  10. avatar Judy says:

    We have a bayside (waterview on two sides with boat launch around the corner and park)cottage outside Annapolis that we would like to look into raffling… any comments and where would we start. Divorce situation and both of us have relocated out of state.

  11. avatar Urana says:

    have read the comments on raffling your home to avoid foreclosure. Why would you need to get a permit from the city or use a nonprofit organization for the process of selling your home? I thought the purpose was a win-win for all concerned.
    You decide the value or previous value, add a percentage for what your county/state requires to sell a property, IE; water permits, taxes/prorated, all the normal fees required in a real estate sale. Of course you want to make a profit. The owner will need moving expenses, unpaid bills and the ability to at least get an apartment. I am sure using a nonprofit organization would help to promote sales, but it also defeats the purpose by adding to the number of tickets that must be sold. There has to be other media to sell the tickets without the additional cost/loss of the sale of the property that would not cost as much.
    You can use an independent company (additional cost)but you could also place the funds in an account/no co-mingling of monies. Raffle purchasers’ have information about the taxes of the view of the home, interior and exterior. It should be stated somewhere on the ticket about the odds of winning
    After the allotted tickets have been sold, the winner would have the property taxes and insurance on their new home. Any upgrades would be their responsibility.
    They will not have a mortgage to pay. I am not understanding why the process has to be made so difficult. Am I missing something?

  12. avatar Sara Abe says:

    I have several houses in different states. I tried to sell a couple houses, it is becoming impossible, now the value is less than what I paid for. my question is can I raffle investment properties, is there any law that says the property must be a primery residental only?

  13. avatar Karla says:

    Oh I so wish I was able to try a raffle, sounds scary though. I need to sell my 7 plus acre farmhouse and after lowering the price down to 249,900 and 18 months on the market it seems like it might be something worth looking into. This was so informative to read. Pennsylvania is hit hard with all the homes on the market. Hope it turns around soon.
    Good luck everyone.

  14. avatar Phil says:

    Can anyone comment on whether there are professional raffle companies who can run such a raffle for a fee?
    Thanks,
    Phil

  15. avatar Tony says:

    Is there a company that can help me raffle 100 new cars for a small fee?
    thanks
    Tony

  16. avatar karja says:

    I am in a seroous bind. I live in a lovely 3/2 pool home with converted garage (self-contained efficiency) in sunny South florida. The problem is, I’m a few months behind on my mortgage with foreclosure proceedings pending. I need to know how to raffle my home., and wonder if any one this side of the nation has successfully done so …and if so, how? Any input would be greatly appreciated. Please help!!!

  17. avatar Gwendolyn says:

    If anyone wants to raffle their home or other property check out this website http://www.dreamhomecharityraffle.net

  18. avatar Rick Wallace says:

    Another good resource for anyone wanting to raffle their home or participate in a home raffle is the following website: http://www.thehomerafflebook.com

  19. avatar mike says:

    can i call it an auction?lets say 100 tickets and the ticket number 100 gets the house.they would of all paid the same ticket price.can i have a private action for those 100 people.i own a house in florida thats all paid off but i want to get rid of.
    thanks for any info.

  20. avatar TG says:

    I have questions. Illinois, We have a building, (residential,and businesses). We would like to know the laws on raffles, it is about to foreclose, what can we do.

  21. avatar Yvonne says:

    I have a home in Sweden I would like raffle and get from under. Its in the country side of Sweden as is perfect for a family with dogs.
    Im an American living in Sweden – any ideas how I might research this out of the US??

  22. avatar Jaime Bautisdta says:

    I thinking to sell my millioon dollars house in lake Elsinore.I do not have the smallest idea how to proceed. Any suggestions. I thinking making 1200 tickets, $ 1000 a ticket, to maximize the probability of winning it. 1200 tickets because , the must be some expenses to incurr. Thanks JB

  23. avatar Toni Dee says:

    Looking to raffle my home, Is e-bay the best way?

  24. avatar Chris says:

    interesting..lots of questions, no answers..

  25. I don’t have the answers. I just reported on a couple of raffles.

  26. avatar alloallo3 says:

    Can you add cash to the winnings? In other words, can you provide as the prize a $300,000 house and $75,000 toward the taxes?

  27. Sounds like a possibility but the $75K may be taxed too. I just don’t know. Anyone else?

  28. avatar Wolfgang says:

    I am a broker in New Mexico and consult sellers in auction marketing. Raffling has worked in NM, I have seen it. The last one I have seen was on a 240k house benefitting Animal Resque. As an auction specialist I am aware that auction will not work for every property, and I will propose raffle, especially when it is a fixer-upper such as a motel/restaurant/4br house combo in Quemado in southwestern NM which needs a face-lift inside-out and is on the market for $ 150k. By the time someone puts another 50-100k in it to update it, it will take too long to amortize from small traffic. But if someone could purchase it for the prize of a raffle ticket and then update it through a construction/renovation loan that’s secured by appraised value, it will benefit the seller and the buyer. I am excited to learn more about raffle, especially also for my ranch clients! Who would not want to own a 320 acre ranch with 2 beautiful home, barn & wells & more that’s listed for $ 875k now for an investment of a raffle ticket?

  29. avatar Frank says:

    We are considering raffling a waterfront lake lot(no house)on Lake Norman, just 25 miles north of Charlotte, NC. We’ve owned it for a little over a year and because of the market are unable to sell it. It’s a beautiful 1.29 acre lot with boat slip and covered sitting area already in place and it’s in a neighborhood of million dollar homes. We were asking $299,900 for the lot and in a good market it’s value should be around $400,000.
    Do you have any info on raffle successes or failures in North Carolina and any suggestions on a charitable organization that might be willing and able to take on the endevour?

  30. avatar MARY SEADER says:

    does the ticket winner have to pay taxws on the chairity portions of the win as i thought charities were non taxable
    MRS MARY SEADER
    msmortgage1@hotmail.com

  31. avatar Tonya Truman says:

    Hi
    My husband and I own a second home in Florida. It is a lakefront property on almost an acre. Due to our family growing we are looking to buy a larger house but are unable to sell ours. (current home is 2200sq ft) Someone was telling us about house swapping with someone who is looking to downsize. Any info on this concept?
    thanks

  32. avatar Preview says:

    Can you sell say a tennis ball for $100 then as a result of the sale, you donate the person’s name to drawing that happens to be a house for sale?

  33. avatar christa says:

    someone approached my non profit to sell her home for funding for us…..can anyone guide me to the right information on the benefits and drawbacks from the non profit organizations persepctive. Is there any liability to the non profit?

  34. avatar Nino says:

    I would like to raffle a home in Arizona, is upside down and I can’t sell it.Has anyone done a raffle in AZ?

  35. avatar Sharyce Gonzalez says:

    i would like to raffle my home in orange county CA. Any non profit groups interested? Has anyone done a raffle in CA?

  36. avatar Robert Burns says:

    I would suggest for any raffle that you have a cash value prize also. There is a real problem with the taxes on any property transfer. Look at Marin Raffle. Also the total amount of prizes is important. Early Bird and Multiple Entry Prize. I’ve won twice in house raffles and I look at the odds on winning carefully and only enter ones that have money prize options options. Are you going to get a huge mortgage to pay the taxes just to accept the grand prize? I don’t think so. The New Mexico raffle mentioned above was successful, but they didn’t mention that they extended the raffle to sell all the tickets. That was a less expensive property and I could’ve afforded the mortgage to pay the taxes on winning.

  37. avatar ingrid says:

    Hi Urana,
    I am wondering about the same thing. Why always all these complications. Did you receive enough Replay to let you know if there is actually a law, which will tell you that you have the do all these steps. After all some one lucky could get a home for the ticket price. I think that the Taxes for the house and closing cost, Insurance could be paid for when there was enough ticket sale. I really would like to know as much about it as I can, since I have thinking on raffle of my house. Now I see that it could get quite complicated. I don’t even agree of having to pay any taxes on the winning of the house so long as the property taxes get paid, I have so many questions about this and I hope you take the time to answer me back. Thank you in advance, Ingrid

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