One website – WinAbode – builds on the recent fashion for property raffles, where frustrated sellers have turned to alternative means to seek the buyers they've been unable to find through conventional routes.
In the case of these websites, sellers list their property on the platforms and pay a commission of 5% plus VAT when it sells. The eventual sale price is agreed before details are put on the site.
For prospective sellers, this commission might seem a little steep, but sellers always aim to sell a home for a little bit more than its open market value. The extra costs cover the website fees and expenses and also aims to ensure that sellers end up 'with more money in their back pocket than if they had sold through a conventional estate agent.'
As for the raffle part – well, individuals entering the competition to win a home purchase £2 tickets (up to a limit of 150 for each entrant) and then have to answer a skill-based question, thus making the raffle legal under gambling legislation.
Once the value of the property has been met (plus the website’s commission), the platform draws the winner at random from a list of correct entries. This means a seller sells their home and one lucky person bags their dream home. If the value of the home is not covered, the site either rolls over the prize draw or someone wins the prize pot in cash instead (minus the commission fee).
Tickets won't always cost £2 – in future they could range from £1 to £10 depending on the property. The first property to go into the raffle is a £700,000 apartment in trendy East London neighbourhood Dalston, which has become a Mecca for hipsters and young professionals in recent years. Around 400,000 tickets are available and the website says it will be donating 10% of its profits to homelessness charity Centrepoint
Is this the future?
In a word – no. Well, it's highly unlikely to be a major threat to estate agents across the country at any rate. While calling it a gimmick would be a tad harsh, a short-term craze may be a more apt description.
The practice of selling homes via a raffle is likely to remain small-scale, but it's still a fun and interesting initiative that may offer salvation for both frustrated sellers and buyers hoping for a dream home that would usually be out of their price range. Many sellers are taking the initiative and setting up their own raffles to try and ensure they reach the price they believe their property is worth, and can afford to give money to charity too.
For prospective buyers, the lack of stamp duty could have significant appeal, as this is often a burdensome cost. On the other hand, like with any raffle, the chances of winning are pretty slim no matter how many tickets you buy.
From the FAQs page on its site, the website makes clear that it carries out due diligence on any property it lists – including proof of ownership and title checks – and that it will cover a winner's legal fees to the tune of £1,500 plus VAT.
Any winner must instruct a solicitor on their behalf to ensure ownership of the property is transferred in the appropriate manner, although the website says it can provide a list of solicitors if necessary.
Some, however, may still question the legitimacy and long-term viability of property raffles. With such a huge prize at stake and such large sums of money at play, is the process safe and secure enough? Is it ripe for exploitation and abuse? Is there enough appetite out there to sustain interest and ticket sales over a long period of time? What's more, are there enough frustrated sellers who would be willing to raffle their home rather than go through more traditional avenues?
While it's made clear that this is not a lottery – because entrants have to answer a skills-based question first – to all intents and purposes it is, with one person striking it lucky each time.
Has there been a backlash?
There has certainly been a rising trend in recent times for house raffles, as frustrated sellers seek to offload their properties in an unconventional fashion. The gambling authorities in the UK have become concerned enough about the rise in popularity of house raffles to offer a stark warning to vendors.
Back in August The Gambling Commission
warned those who flout strict betting rules by raffling their property could face nearly a year in jail as well as a fine of up to £5,000. The lines are blurred when it comes to what is legal gambling and what isn't, which could be leaving people at risk.
Lotteries, raffles and tombolas are based entirely on luck and therefore can only be used to raise money for charity. House raffles, meanwhile, are only legal if they require an element of skill from participants – such as the skills-based question mentioned above – or if they offer a way to enter for nothing. Even if this is the case, the potential for issues concerning tax, stamp duty and legal disputes is still high.
What is the future for property raffles?
There has been an upflift in the number of people trying to sell their home via raffles – and many have had success with it, receiving a high number of entries and the successful sale of their home. In most cases higher end homes or mansions – sufficient to generate plenty of buzz – are the ones being offered.
Paypal, though, this year prevented people from purchasing house raffle tickets because of the problems, complications and challenges such schemes represent, including being potentially unlawful, being conducted unfairly and not advertising the property in question accurately enough.
While there has been a recent spate of house raffles – from £1 million cottages to grand estates – they are not without their risks
or downsides. The creation of these websites shows the potential of an official house raffle platform, but questions will persist about the long-term staying power and dangers of this recent bandwagon.