House raffles are fast becoming a popular and trendy way to buy a home without having to negotiate with the open market. Entrants are able to win a home for the small cost of a £10 raffle ticket, but is the whole thing too good to be true? Are house raffles a sham?
House raffles have really increased in popularity over the past couple of years. In 2018, there were 24 raffles in the UK and by 2020, there were 92. So far in 2021, we’ve already seen 62 raffles with more on the horizon.
They’re an enticing prospect, win a house worth anything up to and beyond a million pounds by simply buying a £10 raffle ticket and hoping your name is drawn out of the hat. But new research suggests that reality very rarely lives up to the dream.
Winmydreamhome.com has revealed that, when you add up all of the house raffles since 2018, the promised home has only been awarded to the winner 19% of the time. The rest of the time, not enough raffle tickets are sold to justify giving the house as a prize.
Instead, either a refund is offered to ticket buyers and the whole thing is forgotten, or a consolidatory cash prize is awarded instead.
If homes are only awarded on 19% of occasions, it’s hard to suggest that raffles are a decent alternative to buying on the open market, or at auction, etc. So, the question is, why do more and more house raffles keep happening?
Marc Gershon, Founder of Winmydreamhome.com, thinks the reason might be that house raffles a win-win situation for the companies that host them.
“It’s shocking how few raffles result in the lucky winner being awarded the promised house. And while a cash prize reaching into the hundreds of thousands sounds like a decent consolidarity prize, one can’t help but think that house raffles have become a quick-profit grab for the hosts rather than an alternative route to market for buyers. In any other disguise, this would be labelled a sham.
“Many platforms offer zero transparency as to what their costs are and how much the cash prize might be before entrants buy their tickets. An unsuccessful raffle could still generate £200,000 in ticket revenue, but the eventual cash prize could be as little as £10K. And because we’re given no insight into these workings, we have no idea if the prize amount is a decent and justifiable one.
“For example, many raffles say that a percentage of ticket revenue will be given to charity, but they do not state what that percentage will be. Nor are they transparent on how many tickets have been sold. This gives them complete freedom to do with the money what they like without anyone knowing whether questions should be asked.”
A lack of transparency means that even if the raffle fails to sell enough tickets to justify awarding the promised home, the host company can still use the ticket revenue to cover their own costs, maybe even take a little bit extra for profit, and then give whatever is left over as the cash prize
In those rare instances when the promised home is awarded, the host’s profits are still large. A prize home could, for example, have a value of £300,000, but ticket sales will generate £1 million in revenue. This surplus of £700,000 is pure profit for the host.
Should I Enter A House Raffle?
In truth, and based purely on the odds, raffles are not a viable alternative to buying at auction or on the open market. Look at it like buying a lottery ticket – it’s not a viable alternative to having a paid job, but it gives you a small chance of becoming very rich overnight. House raffles don’t give you a likely chance of winning the home, but for £10, it might be worth a punt while you keep saving or searching for your next home.
With tickets available for such low costs, one might think, what is there to lose? And it’s true, for each individual the risks are low. But it’s worth remembering that the hosts are making serious money from these raffles and there is not even a guarantee that the advertised property will be given as a prize.
Basically, for all involved, raffles are an act of hit and hope rather than a calculated housing hack.