Property raffles: pros and cons for buyers and sellers
by Housesimple on 12th December 2017
Selling your home normally involves some careful pricing and a dash of savvy negotiation. However, it seems like some vendors across the country have avoided these steps altogether in selling raffle tickets and awarding their property to the winner using websites like WinAbode.com. The idea is a gamble for would-be buyers and an even bigger one for sellers, but the practice is growing in popularity and some people have made big profits.
The question is: should buyers and sellers take the risk? We're here to look at the pros and cons to help you decide for yourself.
Pros: quick profits and cheap properties
According to Which? a manor house in Warrington was raffled off in August this year. Despite being valued at £845,000, it raised an impressive £998,000 for the seller and the lucky winner got themselves a new home for just £20.
The process wasn’t all about exceeding the valuation, however. The owner had previously struggled to sell the property. So rather than spend time and money working out what house buyers want, he made it accessible to the millions of individuals willing to part with a few pounds for the chance of a big win. Likewise, all those people itching to jump onto the property ladder had an opportunity to do so for next to nothing.
Seller cons: potential risks and gambling laws
The Gambling Commission has already issued a warning against house raffles. Specifically, they warn that improperly organised raffles may fall foul of gambling laws and be classified as an illegal lottery. So any sellers considering the process will need legal advice before they go ahead.
Then there’s the matter of repaying the mortgage. Unlike a standard sale, there’s no way to control how much money a raffle will generate. If all goes to plan, you might make a profit, but there’s always the chance that the sale price won’t be enough to cover your mortgage, and that could leave you in negative equity.
Buyer cons: extra fees and no guarantees
On the buyer side, a house might seem like an appealing prize, but if you do win there are many other things to consider. Stamp duty may still need to be paid, while there might be mounting bills and repairs to cover once you're the rightful owner – and you won't have conducted your own survey to check on the state of the property. What's more, winning a property in a completely different part of the country comes with its own moving costs as well as the stresses involved with relocating your life elsewhere.
What's more, when you pay to enter a property raffle, there's no guarantee that you're going to win the jackpot and walk away with a home. While it seems tempting to put a little bit of cash in now to win a potential palace, there's also a thing to be said for keeping that money safe to invest in a surefire property investment further down the line.