Property prize draws have been in the news as several quirky homes have come up for grabs. But when the ticket money dries up, many disappear into the ether. Moneywise investigates
From a 19th-century Scottish castle (pictured above) to a three-bedroom detached house near Salford University, rising numbers of homes are being raffled rather than sold through conventional means.
Becoming a lord or lady of the manor, or simply being able to get on to the housing ladder can make them tempting, especially when raffle tickets are often as low as £2 each.
Even celebrities have jumped on the bandwagon, with Formula One boss Eddie Jordan raffling his £750,000 apartment in Tooting, south London, and Derrick Evans, aka ‘Mr Motivator,’ giving entrants the chance to win his home in Jamaica, worth $40,000 (£30,000), and an adventure park business.
But if these competitions seem too good to be true, it is because most of them are. 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.
In the past 18 months, competition website Loquax has listed 50 house competitions of which 41 are now closed. 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.
In one high-profile case in January, businessman Mark Beresford angered entrants when he pocketed around £500,000 after changing his ‘Win A Mega Home’ prize from a £3 million house to £110,000 cash.
A further 15% of competitions listed on Loquax have ended with ticket refunds and in 9% of cases the results remain unknown, including the competition for Eddie Jordan’s flat, which closed in December 2018.
Jason Dale, managing director of Loquax, says the Eddie Jordan Win a Property competition is a good example of how prize draws fail entrants.
“The website is now closed and under construction and there’s no trail to follow to find out what happened, who won, how many tickets were sold. How does anyone contact Win a Property now to get information?” asks Mr Dale.
Moneywise approached Win a Property, but no one was available for comment. The business is still listed on Companies House.
Brixton beauty: This £650,000 flat (left and above) in south London is being raffled via Raffle House
It appears that although on the whole competitions are legitimate, they can be poorly managed or have unrealistic expectations.
YourLaddr, which aimed to be a portal for house competitions, offered a £3.2 million Knightsbridge flat in 2018 but awarded a cash prize, after which the company vanished.
“I think the issue is that many of the promoters or owners are not experienced with competitions or dealing with social media,” says Mr Dale.
“A lot of them had to deal with disgruntled entrants, some legitimate gripes others not so, and this has resulted in them deleting social media accounts and their websites. This then escalates problems rather than resolves them.”
Consumers do not have much recourse if there is a problem with a competition, other than complaining 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 grievances and found many in breach of the Committees of Advertising Practice code for changing closing dates, adjusting Ts&Cs, withholding the prize advertised or offering significantly lower-value cash prizes.
Complaints have been upheld against Homeraffler.com, Real Hot Property, HMV Competitions and Win Your Dream Home.
Many companies have been discontinued, dissolved or struck off Companies House for not providing annual accounts after failing to sell enough tickets.
The latest spate of house competitions sprouted after the Win A Country House contest in 2017, which saw property owner Dunstan Low successfully raffle Melling Manor in Lancashire, after raising £1 million from selling 500,000 £2 tickets.
Mr Dale says the number of competitions is now dropping and he expects to see it fade away all together.
He says: “The fact that just two properties have been won since 2017 suggests that the future isn’t good for them.”
One firm attempting to buck the trend is Raffle House, founded by entrepreneur Benno Spencer and supported by Brian Mattingley, chairman of gambling brand 888.
Mr Spencer says he has spent a year raising money, researching the market and consulting lawyers and focus groups.
“The only way to secure enough ticket sales is to advertise heavily,” he says. He also agrees that the industry is “quite rightly” under a lot of scrutiny.
Raffle House currently has a £650,000 Brixton flat and more properties in the pipeline. But it has already had to extend the deadline for its first property.
Mr Spencer admits to launching it “naively” with a tight deadline and delay in receiving investment for advertising.
“In four months of advertising we are half way there. We will be closing in June, maybe before,” he explains.
“It looks shambolic and badly planned, but we are committed to awarding a property. The business would struggle to do anything again if we didn’t. We hope to be a UK first.”
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.
To avoid being classified as an illegal lottery, a prize competition must involve an element of skill. So a raffle must ask entrants a quiz question that is tricky enough that a significant proportion will get it wrong and won’t be eligible for the prize draw.
The Gambling Commission has clamped down on raffles, taking action against 42 competitions in 2017 and 2018.
PayPal and Eventbrite have stopped their services being used for house raffles, making it difficult to set up a secure payment method.
Another obstacle is HMRC, which may regard the proceeds from raffle ticket sales as income subject to income tax and capital gains tax.
Prize or burden
Even if an entrant does win a property, without viewing beforehand, they don’t know what they are getting into.
Melling Manor winner Marie Segar initially rented the property before selling it for £305,000, despite Mr Low claiming the six-bedroom property was worth £800,000.
Property investor Natasha Collins says you could end up winning a “liability” and it is better to buy a cheap property at auction.
“You really have to go into these competitions with your eyes open. You will have to take on the cost of running the property,” she says.
There is also the question of whether a property is structurally sound or needs money spent on it to make it habitable.
Mr Spencer says properties promoted by Raffle House are “prizes, not burdens” and the company will only offer one- or two-bedroom flats, with cash to cover household bills in the first year.
But Sarah Burns, managing director of prize promotions agency Prizeology, says consumers need to do their due diligence and ask why properties are being raffled in the first place.
“It is an easy way to get money out of people without offering anything at all. There could be no house,” she warns.
Moneywise tried to find a winner of a raffle – either winning house or cash prize – but with so many property raffles failing to achieve their stated aims, none were forthcoming.
What to watch out for
Entering a house raffle is a risk but consumers can minimise this by checking Ts&Cs and other details, plus seeing how responsive and transparent promoters and owners are. Questions to consider are:
• What happens if not enough tickets are sold?
• Will refunds be offered if there are problems?
• What extensions may apply?
• How will the competition be judged or drawn?
• How will winners be notified and how much money will be retained?
Win A Castle: the home raffler’s view
A 45-room castle in Scotland valued at £2.3 million made headlines in 2018 when writer Susan DeVere tried to raffle it.
Ms DeVere says setting the competition up was “fairly straight forward.” She ensured that it had a website, Facebook profile and a good prize question. She took legal advice and says throughout the process she was transparent and available to answer questions from the public.
The competition ran for eight months and £5 tickets were sold across the UK, Germany and America.
“It seemed a good way to pass the castle on to other people. People viewed it when it was on the market and they didn’t have the money to do their plans. I also wanted to raise money and awareness for charities,” says Ms DeVere.
But despite her best efforts, and extending the deadline, she only raised £107,000.
Out of pocket: Susan DeVere (above) tried to raffle her castle in Scotland in 2018
She says: “We were going for £2.5 million because we wanted £1 million for charity but if we had got £1.5 million we would have gone ahead.
“The main problem was that people didn’t believe it, they thought it was clickbait on Facebook. Six weeks into it, PayPal said it would no longer do it and Eventbrite just refunded all the money back and didn’t tell us.
“People had to pay through their banks. If we had credit card payment or PayPal, we would have made it.”
In the end, Win A Castle handed out three cash prizes of £65,000, £7,000 and £5,000. After giving a sum to charity, Ms DeVere was left out of pocket.
Despite selling only 5% of her ticket target, she says she would raffle her Scottish castle again. “I still think it’s a good way to go if it is done properly,” she says.