House raffles are often in the news for all the wrong reasons, but a property developer in London is looking to change the way they are perceived
House prize draws may seem like a great way of getting on the property ladder without the expense and hassle of buying a home, but for some they can turn into a nightmare.
Many of the competitions end up getting cancelled after failing to sell enough tickets to cover the cost of the property.
Sometimes winners only get a cash prize rather than a house, while on other occasions organisers have been known to disappear with the proceeds, never to be heard of again.
Property developer Marc Gershon is looking to change this negative perception and raise standards in house competitions.
“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 around house competitions and we want to change this,” he says.
His company Misuma is behind the Win My Dream Home competition, which is offering contestants the chance to win a £2.1 million four-bedroom Victorian property in Kentish Town, London, all for the price of a £10 ticket.
Mr Gershon says that as it is run by a legitimate business and not by an individual homeowner there is a far greater degree of liability and accountability.
The number of tickets for the competition that must be sold for the house to be offered as a prize is 250,000. Anything under this and the winner will receive 60% of all money raised.
There is however a maximum cap of 450,000 tickets to be sold. So once this is reached a winner will then be chosen. If the sale of 250,000 tickets is exceeded but the maximum cap of 450,000 tickets is not reached, the competition will end at the end of December.
The prize includes all legal fees and stamp duty costs. You can buy as many tickets as you want and 10% of all money raised will be donated to charity.
Should you enter?
The dip in the housing market as a result of Brexit uncertainty has seen an increase in property raffles as homeowners attempt to secure the price they want, which is often below the current market value.
Many of these competitions are too good to be true. A recent investigation by Moneywise found that while often legitimate, a lot of them are often poorly managed.
To raise enough cash to cover the market value of a property, thousands of tickets need to be sold, which does not happen in most cases.
Competition website Loquax has listed 50 house competitions of which 41 are now closed over the last 18 months. Only two of these resulted in anyone winning a property, one of which was a community project in Ireland.
In more than 70% of cases a cash prize was awarded, usually worth far less than the estimated property value. In some cases, the winner receives just a few thousand pounds because the raffle didn’t sell enough tickets.
Raffles risk being shut down if they breach the Gambling Act 2005. Only charities and not-for-profits are legally allowed to sell prize tickets where the result is based on chance.
Unlike other house competitions the Win My Dream Home competition is not a raffle or similar to the spot the ball format, which is essentially down to the choice of a judge when choosing the winner.
Instead, entrants have to complete a multiple-choice question. This means it meets the requirements of the Gambling Commission as it requires an element of skill.
One of the main problems with previous house competitions is that they continue to extend the deadline if they don’t secure the number of entries that they would have liked.
Mr Gershon says the Win My Dream Home competition will not be deploying such tactics and wants to remain transparent by setting a time frame that does not run beyond the end of the year.
If you are unhappy with a competition like this there is not a lot you can do, apart from complain to the Advertising Standards Authority (ASA) which can order the promoter not to do it again.
The ASA says it has seen a rise in property raffle complaints and has found many in breach of the Committees of Advertising Practice code for changing closing dates, adjusting T&Cs, and withholding or offering significantly lower-value cash prizes.
Jeremy Leaf, north London estate agent and a former RICS residential chairman, 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 in still much confidence in the process.
"There can be some serious sums involved but it is more likely to be successful the better the regulation.
“One can see the attraction of ending up with a property worth many times more than the value of a raffle ticket. However, it is not as simple as that and there is a danger that the system is open to abuse.”
Andrew Montlake, director of mortgage broker Coreco, says: “Whilst I don’t really approve in general 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 wide open about the chances of winning then there is no real detriment.
“For me, however, if you are going to have a competition or an auction for that matter, the prize itself should ultimately be won whatever the number of tickets actually sold. It should not just be another way of selling a property at a higher price.”