If you are wondering whether “Can I raffle my house?” rather than sell it, then there are some issues to take on board – and you may not be saving yourself from any stress.
Survey after survey reveals that selling a home is one of the most stressful things we undertake, especially since it beats starting a new job and even organising a wedding.
When selling and buying property, homeowners and potential buyers are entering a process they don’t have lots of knowledge about, and it’s a very expensive undertaking.
For this reason, a house raffle may appear to be a great solution, particularly if your home is not attracting any bids and has been on the market for several months.
One of the big attractions for people to partake in a property raffle is that the tickets cost only a few pounds and with the prospect of winning a property that could be worth a considerable amount, what’s not to like?
Well, if you don’t understand how property raffles work and what your obligations are as a winner, probably quite a lot.
Is it legal to raffle your home?
Firstly, the question to ask is ‘Is it legal to raffle your home?’
The short answer is that raffling a property is not an illegal undertaking, but it is a process that is fraught with pitfalls.
And while property raffles are not a mainstream way to sell a house in the UK currently, raffles are growing in popularity.
One reason for this is that homeowners who are struggling to sell, or their property is a tad too quirky for buyers, may see a raffle as a great way to attract buyers.
It’s at this point we should highlight that you should engage the services of a solicitor who has the experience, or at least thoroughly understands the law about raffling a house in the UK, to ensure that you stay within the rules.
Indeed, one reason people get to hear about a house raffle is when they contravene gambling laws and make the news because your raffle could be deemed as an illegal lottery.
Make no mistake, if you are selling a ticket that will win a prize from a draw, this will be legally classed as a lottery.
And it’s the lottery rules that must be followed and you’ll need a licence from the Gambling Commission and understand the regulations.
This will be a basic mistake because by breaching Gambling Commission rules, you will face a £5,000 fine and the prospect of up to 51 weeks’ imprisonment.
Can I raffle my house in the UK?
As mentioned previously, you can raffle your house in the UK, but you need to understand that you are not selling it, you are organising a lottery and offering it as a prize.
Some homeowners may decide to raffle their house and for the profit or all the money to go to a charity – they still need to register with the Gambling Commission. They warn:
- Some raffles may try to circumvent the lottery rules by asking a question – which makes this a competition instead;
- If a raffle hasn’t been organised properly it will breach current gambling laws;
- Be wary if the raffle appears to have been set up for commercial gain – which will make it an illegal lottery.
The other issue when you want to raffle a house in the UK is whether you have a mortgage on your property. This means that:
- If you do have a mortgage outstanding, you may need to ask for a higher price per raffle ticket or sell more than you thought you had to;
- If you don’t sell enough tickets, then you may face issues with negative equity – that’s when a house is sold for less than it’s worth and you still own the lender the balance.
Put simply, a property raffle is probably more suitable for those homes without a mortgage.
Has anyone won a house in a raffle?
One online raffle platform has researched the subject and found that in just 19% of raffles, a prize has been won.
The platform says that anyone thinking about buying a property raffle ticket should ensure they understand the rules and the prizes involved.
There were 24 house raffles in 2018, but only 8 in 2019.
However, house raffle numbers rocketed to 92 in 2020 – with 2021 looking set to hold more.
Since 2018, 19% of raffles handed over the top prize, while 37% of raffles failed to sell enough tickets to award the house as a prize – instead, they gave a lesser cash prize.
How do you raffle a property?
The process to raffle properties in the UK is straightforward, but it is probably a more complicated process than many homeowners envisage. You will need to understand:
- The legal implications and the expense of organising a property raffle;
- How much to charge per raffle ticket – in some cases the raffle winner may be able to move into their new home for just £5 though most tickets will cost more, especially if the house is worth £1million or more.
Can I raffle my house legally in the UK?
It is legal to raffle a house in the UK, and there are some websites available that will facilitate the raffling of a property.
However, the Advertising Standards Authority says it has investigated various property raffle promotions and found many to have breached their own terms and conditions, changed the closing date or even withheld the prize.
The ASA also says that property raffle organisers may have omitted conditions or even offered the winner a lower value cash prize.
Among the ASA’s rules and regulations, these are the important ones:
- Award the described prize or an equivalent that’s reasonable;
- Make clear the closing date – and think carefully before changing this;
- Decide whether you want to offer a free entry route into the raffle;
- Do not mislead participants by leaving out important conditions.
There is another caveat for offering your property as a raffle prize, and that’s what do you do if you don’t sell enough tickets?
In some cases, you will need to refund the money to participants, or you may find that you are contractually obliged to honour the prize being offered – so the winner will move into your home, and you will have made a loss.
What happens if you win a house in a raffle?
The question, ‘What happens if you win a house in a raffle?’ is a good one.
So, while the homeowner will organise a raffle to attract a sale, the winner also needs to understand what happens next.
When you win a raffled home, HMRC makes clear that capital gains tax will be based on the property’s open market value on the date it was won.
Essentially, if you are the winner of a property raffle, and then sell your current home straightaway it’s unlikely there would be capital gains tax for you to pay.
However, you will need to take legal advice to ensure you don’t get handed a CGT bill at a future date.
The problems for a property raffle winner
There’s no doubt that a property raffle may attract attention because you stand the chance of winning a dream home.
Indeed, there is one organisation advertising a property raffle regularly on TV with a promise of a dream home and this will be raising money for a well-known charity.
However, as the winner you should consider:
- The repairs and maintenance costs for a dream home that you win;
- It’s unlikely that the property will have had a property survey carried out;
- There may be outstanding bills to pay on the property;
- You may still need to pay stamp duty;
- You will still have the stress of moving home – and the costs of doing so.
Why bother running a property raffle?
So far, we have seen that while running a property raffle appears to be straightforward, there are legal pitfalls, and you need to sell a lot of tickets which means lots of work.
Also, for those who are buying a raffle ticket, they need to appreciate that a homeowner may decide to raffle it because they are struggling to sell.
Also, the property is being offered as a raffle prize tend not to be everyday homes but can be trendy or even grand properties.
This means that having a unique property makes it a tad harder to sell when you decide to move on – particularly if it comes with a big price tag.
It also needs to be appreciated that if the raffle consists of answering a question, then you are entering a competition and those organising the raffle are trying to avoid Gambling Commission rules.
The Commission also makes clear that a property raffle should not be undertaken for financial gain so some of the money should be earmarked for charitable purposes.
This may mean that those running the raffle may sell more tickets than are required to cover the property’s market value and any excess, ie the profit will then be donated to charity.
The bottom line is that when you need to sell a house, then using experienced estate agents is still probably the best route to take.
Can I raffle my house – what you must do
If you decide to go ahead with a plan to raffle your house, you will need to ensure that everything is transparent and legal when doing so.
Organising a property raffle that meets its legal obligations is the route to success. Also, you should:
- Remember to add in legal fees and other costs when determining how much your property is worth – and how much the raffle tickets should be priced at.
- Remember too that you will need a Gambling Commission licence to run the lottery, but if you opt for a competition then this is not an issue for the Commission.
- The rules around buying a raffle ticket should be 100% clear and the conditions must not break the rules set out by the Gambling Commission.
It’s also worth noting that the Gambling Commission offers lots of advice and are happy to answer any questions if you have any concerns.