9:56 AM, 8th June 2021, About 2 years ago 6
House raffles continue to pop up on a regular basis, offering the chance to get on the property ladder for the cost of a lottery ticket. But are they really the bargain of a lifetime? Or are they just a con? Does anyone actually win? And do the house raffle companies actually expect anyone to?
In 2020 alone, there were as many as 92 individual house raffles offering the chance to win properties valued as high as £3.2m for as little as £10, with 62 such competitions currently running at the moment.
However, just 25 of those have actually gifted the property with the majority having failed to sell enough tickets to justify doing so, instead gifting a cash prize.
Now on its second raffle, an insider from a leading house raffle company has lifted the lid on the world of house raffles, revealing just what your money is spent on and why so many fail to make it to their goal of giving away a house.
What sort of planning has to go into this sort of raffle before it goes ahead?
Before commencing a property prize draw, extensive legal advice must be sought to ensure the draw conforms to the relevant laws and guidance of the Gambling Commission.
In addition to this legal advice, there’s initial website design, the implementation of the payment processing function, advertising campaigns on formats such as TV, Radio and social media as well as the ongoing management of the competition.
What are the costs?
The cost of social media advertising alone can put many house raffles into the red and so while a shiny TV advertising campaign such as those implemented by Omaze might create an air of legitimacy, you can guarantee it will be costing a huge sum to execute.
Companies such as Omaze will spend millions of pounds on TV, Facebook ads and Google ads to hook potential gamblers. Because a gamble, it certainly is.
How do the people running the raffles make money?
So how do house raffles cover these monumental marketing costs and turn a profit?
The main way house raffles make their money is through the vague interpretation of their T&Cs. In their terms and conditions they will state that any cash prize to be awarded will be based on a percentage of their ticket sales ‘less their costs’.
However, as many fail to disclose just what percentage of ticket sales will be awarded as a cash prize, this rather ambiguous definition leaves them free to recoup the huge sums spent on unsuccessful marketing, as well as taking whatever percentage of profits they see fit. Often, the amount left from the originally proposed ‘giveaway’ is a small percentage of the value of the home itself.
This sector is unregulated and Marc Gershon, Founder of WMDH says that it really must be given the number of ‘chancers’ that are now playing in the sector.
He commented: “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. At Winmydreamhome.com, we allocate 10% of all ticket sales to charity and set aside a further 60% of all ticket sales for the alternative cash prize which currently sits at £120K. We’re completely transparent about this from the outset and we advertise the number of tickets sold on our home page, as well as current cash prize, charity donations and even the odds of winning..
The remaining 30% is swallowed up by social media costs, video production, payment processing, the list goes on. To be profitable the draws need to reach the target at which point the property is awarded and should they fail to do so, this is when many raffles will make heavy withdrawals from the ticket sale pot to cover their backs. Because they don’t reveal the number of tickets sold there’s no way of knowing just how much they are taking and what percentage is awarded to the winner.
We’re now on our second raffle, and it looks as though we will be awarding a huge cash prize of over £120,000.00 to our lucky winner as sales have not been sufficient to award the apartment. Our website updates the stats with every sale so all our clients know the minimum they will win at the time of entry. We would love to award the apartment but having currently sold approx 40,000 of the 140,000 paid tickets needed, the cash prize seems more likely unless there is a huge sales push in the last month.”
Omaze, success story or more of the same?
Omaze is the only company to have successfully scaled and awarded their homes but has this recent success story helped boost the image of the house raffle space?
Like many of its predecessors, Omaze is one such platform that fails to disclose any information around the odds of winning, the number of tickets sold or what percentage of funds raised is actually donated to charity.
So you can only assume they are keeping this information hidden for a reason and Winmydreamhome suspects the reason is that Omaze is using the charity angle to take a huge slice of profits, while donating a marginal percentage to charity, relative to the total ticket sales amount itself.
But does it matter if the winner receives a house and money is still made for charity?
Well, Omaze is currently raffling off a house in the Cotswolds thought to be worth in the region of £2.5m, what they failed to disclose was the fact that property had previously been prone to a high level of flooding. An issue that can cost an average of £32,000 just to rectify. Unless you search the fact yourself, no mention is made in the website and advertising.
Omaze claims to have rectified this issue before gifting the house, however, it’s just another example of house raffles lacking transparency when dealing with the consumer.
In addition, there is very little information provided on running costs which on a larger home would require a small fortune to cover. As a rule of thumb, property running costs usually sit at around 1% of a property’s value, meaning the winner of a house raffle valued at £2.5m would need to fork out £25,000 a year in upkeep costs.
While the winner is well within their rights to sell the home they may struggle to do so, with Omaze’s flood-prone Cotswold’s home previously stagnating on the market with Knight Frank for two years having seen multiple deals fall through.
Some house raffle platforms such as Win My Dream Home, which are currently offering a stunning £500k Apartment in London, are careful to offer a prize which the winner can afford to live in if they wish. With no extortionate running costs to burden the winners.
Marc Gershon of Winmydreamhome.com , commented: “There is definitely a market for house raffles if done correctly and we have learned some hard lessons on how to improve the sector during our own efforts. 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.
Unfortunately, while we believe that total transparency is key and have always provided this information as standard, it doesn’t guarantee success. To sell enough tickets you need vast resources to advertise on TV, social media and a number of other channels.
This comes at a huge cost and one that has to be factored in from the start. While Omaze is the only company to have achieved this, the cost to the consumer remains unclear.
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 expenses”
11:53 AM, 8th June 2021, About 2 years ago
This is why our opportunity is the most transparent in the UK and has been highly spoken about by the ASA, all shown on our Media Page...
There is a genuine and main challenge to running the operation of any and all PDC's and this is surrounding finding a payment processor who will allow tickets to be bought on Cards, or, in the eyes of 'the system', on credit... In the case whereby an entrant wishes to pay via Credit Card or a credit account, such as PayPal/Stripe etc. Buying on Credit is fraught with all sorts of legal and moral dilemmas both for ourselves and the providers, hence they all tend to say they do not support PDC's, Raffles, Lotteries etc etc.
We have tried many routes and have found BACS Transfer to pay for tickets the only solution where there is little 'system' resistance.
The Odds of winning in our Prize Draw are clearly shown upfront and openly, along with how the funds and charitable elements will be distributed. Our Odds are also the best in the UK, just 150,000:1 ... the odds of winning the National Lottery is a staggering, 1,057,474:1
Take a look and by all means ask any questions here which are not answered on the Media Page of our website or email us direct from the Page or chat to our Support Team, the link will open as you enter the website.
Wishing you a great day ahead!
14:34 PM, 8th June 2021, About 2 years ago
Hope the £500,000 flat doesn't come with cladding, wooden balconies or missing fire barriers!
13:46 PM, 9th June 2021, About 2 years ago
Reply to the comment left by michelle green at 08/06/2021 - 14:34
Or a sitting tenant!
20:19 PM, 9th June 2021, About 2 years ago
Stats seem to be have been obtained from https://www.loquax.co.uk/win-a-house.php
It is a shame this has not been appropriately referenced.
10:50 AM, 10th June 2021, About 2 years ago
Seems like a one way bet for the sellers/promoters. From the loquax site:
Win My Dream Home 2
Property Development Company, Misuma Limited, are running their second win a house competition. This time round you have the chance to win a flat in Kentish Town that's worth over £500,000. Tickets cost £5 and the promoters are aiming to sell 140,000 by the end of June 2021.
Raffle House 3
A £750,000 two bedroomed property in the Lambeth area of London is the third offering from Raffle House. For just £2 you have the chance to win this stunning home or a 90% cash prize should they fall short of their target of 650,000 ticket sales.
So in the first case £700,000 of tickets may be sold. If 10% of sales goes to Great Ormond Street then unless pretty close to that number is sold, it is unlikely the house will be won as the costs of the competition and the cut being taken by the promoters are not disclosed. The How it Works section does not state the minimum number of tickets that have to be sold before the prize is won.
In the second case I mention they explain:
Raffle House have set the initial closing date for this competition as the end of June 2021 (extended from November 2020). This is quite ambitious but other £2 competitions have turned over much quicker recently! This time round they aim to sell 650,000 paid tickets (£1.3million revenue). Unusually the site has given a break down of why they've opted for this figure. This is actually a fascinating insight into the costs of running such a competition and it's profitability. If not enough tickets are sold then either a 90% cash sum (after deductions) can be awarded or the competition can be extended by up to a maximum of six months.
This is opaque. Does it mean that unless £1.3M revenue is generated the prize won't be won? You tell me!
Where is the "break down" (explanation)? What "fascinating insight"? No explanation and no link to where this information might be found.
The 90% cash sum (after deductions) means that 10% after deductions is retained by the promoters.
It's a gamble, like the National Lottery but no lucky winner is guaranteed to end up with a house. Giving a small amount to charity is a way to make gamblers feel like they are doing good. If you want to give to GOSH, do so. You and they can claim tax relief if you are a UK tax payer.
20:17 PM, 10th June 2021, About 2 years ago
Reply to the comment left by Ian Narbeth at 10/06/2021 - 10:50
Iirc when we wrote the original review we had included a link. Anyway here is the reference. Fascinating because no one else previously had detailed this info.