Are housing raffles a scam?

·5-min read
Cotswold cottages. Photo: Dominic Jones/Loop Images/Universal Images Group via Getty Images
Cotswold cottages. Photo: Dominic Jones/Loop Images/Universal Images Group via Getty Images

The pandemic has seen a revival in win-a-house competitions with a far larger number of properties being won.

But are these often ambiguous contests worth entering or are they just a scam?

Cash not houses

The win-a-house trend started back in 2008 during the height of the recession as homeowners looked for innovative ways to sell their property.

One of the most famous prizes was a Devon property worth £1m ($1.4m) which became the first such housing raffle to successfully reach completion.

Since then very few competitions have actually reached completion due to insufficient ticket sales and winners have often received a comparatively low cash prize instead. In some cases ticket money has been refunded and in others the contest has simply closed, the funds disappearing with it.

UK online competition portal Loquax began recording win a house competitions in 2018. During the past three and half years there has been a total of 216 different contests of which only 36 have led to a house giveaway – that's 17%.

The most expensive house was the £3m Omaze London property won by Marilyn Pratt but alternative cash prizes have been less substantial. The first Raffle House competition paid out £173,012 whilst the Dream Home Prize Draw awarded £365,366 despite the West Sussex home up for grabs being worth £1.2m.

Housing competition statistics. Source: Loquax
Housing competition statistics. Source: Loquax

Pandemic boom

The vast majority of successful competitions were during 2020 as the tough housing market once again led people to unusual selling methods. There were 92 contests and 25 houses awarded. Since 18 of the competitions are still open that equates to a 34% success rate.

Jason Dale, managing director of Loquax, said two quick property contests in quick succession kick started the pandemic rush which saw consumers buying raffles tickets in larger numbers.

"People saw the mechanic as one that was legitimate, that wasn't going to drag out for months and that could genuinely result in a house winner."

A drop in ticket prices also had a positive impact said Dale.

"Ticket prices on many of the successful competitions were just a couple of pounds so maybe 'worth a little flutter' especially as sport had locked down and no one could go out."

Jemma Nicklin, 23, celebrates with a bottle of champagne during her first visit to Shrubbery Farm in Longnor near Shrewsbury, a 300-year-old four bedroom farmhouse which she won after buying two £2 tickets in a raffle organised by owner Mike Chatha. Photo: Jacob King/PA via Getty Images
Jemma Nicklin, 23, celebrates with a bottle of champagne during her first visit to Shrubbery Farm in Longnor near Shrewsbury, a 300-year-old four bedroom farmhouse which she won after buying two £2 tickets in a raffle organised by owner Mike Chatha. Photo: Jacob King/PA via Getty Images

Limited accountability

The biggest issue with housing raffles is the lack of transparency. They often fall between a raffle and a competition and many have been shut down by the Gambling Commission for failing to comply with gambling laws.

"Unlike betting and bingo, raffle sites are not regulated in the same way. This means players don't get as much protection or safe limit tools as they would on a licensed gambling site. When things go wrong then there's little support for entrants," explained Dale.

Officially these contests are now regulated by Trading Standards but entrants still have a responsibility to read the terms and conditions to see if they are entitled to a refund if the raffle is cancelled. There may also be unexpected costs such as stamp duty or conveyancing included in the prize.

And you also need to ask yourself why the property was not sold on the open market? Are there maintenance issues, is it prone to flooding or is it in an undesirable location?

Marc Gershon, founder of Win My Dream Home acknowledged lack of transparency was a huge issue.

“Many house raffles fail to disclose how they spend the money raised through ticket sales and this lack of transparency is often for a reason. Being upfront about the number of tickets you need to sell, what percentage of ticket sales income is guaranteed to be awarded as a cash prize if you don’t reach this target and what percentage will be awarded to charity, all help to increase consumer trust," he said.

"My concern is that some house raffle companies do not intend to award a house as a prize at all – their goal is to just sell tickets and to pocket the majority of the proceeds through management charges and marketing expense,” he added.

Do your research

As a consumer it is important to check reviews of people and companies running the prize giveaways and gauge whether they are reputable.

Dale's advice is to look at the detail.

"Be familiar with the terms especially when it comes to extending closing dates and an alternative prize should not enough tickets be sold. We do advise looking at ticket prices and minimum ticket sale requirements. Is the promoter being greedy or realistic with their competition? Are they hoping to generate £1m for a £100,000 apartment. How much is being offered back to entrants in terms of the alternative cash prize?"

And as with all gambling you should only spend what you can afford to lose and housing competitions should be treated the same as betting or bingo.

Watch: How much money do I need to buy a house?

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