‘Win a £2m home for a tenner’: are property raffles worth the bother?
The latest ‘win a house’ raffle is offering contestants the chance to own a £2.1m luxury London property for just £10.
The renovated four-bedroom, two reception Victorian home is located in the trendy suburb of Kentish Town close to schools and transport links.
The house is set over four floors with a master bedroom, including walk-in wardrobe and ‘luxury’ bathroom, occupying the entire top floor.
Property development firm Misuma is behind the ‘Win My Dream Home’ competition, which is unusual as these types of raffle are typically offered by individual homeowners.
A single ticket costs £10 but if you buy two or more, you’ll receive the same amount in bonus tickets.
Should you bother entering?
Parting with a tenner to be in with the chance of owning a multi-million-pound home may seem like a no-brainer, but if you’re tempted, it’s worth noting that previous house competitions have rarely been successful.
A tricky property market and Brexit uncertainty have led to several of these raffles popping up in recent months.
However, many have flopped after the sellers failed to raise the minimum amount, so have either not given away the property or provided a cash prize instead.
Some have been criticised for falling foul of gambling rules. To operate legally, raffles have to be run as free draws or prize competitions which depend on the skill or knowledge of the participant.
One recent failed raffle, run on Cadivus, offered the chance to win a £2m flat in South Kensington, west London for the cost of a £10 ticket.
However, it only raised £227,000 after seven months, 11 per cent below its target. Rather than giving away the property, the seller awarded a £53,500 cash prize to one winner, put £120,000, towards the costs for VAT, marketing and legal bills and kept the remaining £53,500.
Reversing the stigma
The team behind this latest offer hopes to reverse the negative perceptions of property raffles.
Marc Gershon, director at Misuma, says: “It isn’t the format itself that has let people down in the past, it’s those operating without the correct level of knowledge or with a lack of transparency that has created this negative stigma, which we want to change.”
He believes the fact that this competition is run by a property development company and not an individual homeowner gives it some legitimacy.
“As a business venture, this is something new for us and that’s why transparency and diligence have been at the core of everything we’ve done so far,” he says.
Misuma plans to donate 10 per cent of all money raised to a children’s hospital.
The firm has capped the minimum number of tickets that must be sold before the house is provided as the prize at 250,000.
If fewer tickets are sold, the winner will receive 60 per cent of all money raised. The maximum ticket cap is 450,000.
If the minimum cap is exceeded but the maximum cap not reached, the competition will end on 31 December 2019.
The prize includes all legal fees and stamp duty costs.
To meet Gambling Commission requirements, contestants will have to answer a multiple-choice question.
Contestants can buy as many £10 tickets as they like up to a maximum of £100.
Jeremy Leaf, north London estate agent, says: “It sounds like this property raffle is an improvement on some of the ones that have gone on before but there is still a lack of regulation and transparency, which doesn’t instill much confidence in the process.
“There can be some serious sums involved but it is more likely to be successful the better the regulation.”
Andrew Montlake, managing director of mortgage advice firm Coreco, adds: “While I don’t really approve of house competitions, I do like the fact that they have set out some very defined rules.
“As long as these are strictly adhered to and people enter the competition as they would in any other way with their eyes open about the chances of winning then there is no real detriment.”
A problem house?
However, there could be unforeseen issues for winners.
Robert Rosenberg, a partner at law firm OGR Stock Denton Solicitors, says: “When you buy a house normally, a lawyer will spend four to six weeks investigating it. They’ll ask the seller a lot of questions. You’ll also hire a surveyor who will tell you if there’s a leak in the roof that could leave you £40,000 worse off.
“With a raffle, this won’t happen.”
Rosenberg says the raffle route means you won’t really know what you’re getting.
“There are a lot of ways to sell a property – privately, through an estate agent, or via an auction.
“The people behind this raffle have presumably exhausted all these options so the first question should be: what prompted the raffle? There could be a lot of potential problems.”
According to HMRC, there are no tax implications for winning a house in a raffle but income tax and capitals gain tax may apply if the winner decides to sell the property.
If you own a property already, you may also end up having to fork out around £28,000 to cover the second home stamp duty fees, which Misuma will not pay.