Dream House Raffles: What to Know Before You Enter
The reality of these raffles falls short of the advertisements, experts say
Multimillion dollar dream house raffles are a relatively new way of raising money for charities such as art centers, community services and programs for families whose children are fighting terminal illnesses.
But the advertising for these raffles may be misleading. Winners may not get the prize that’s advertised, among other things, and only a fraction of the money raised may go to charity, according to the Better Business Bureau.
In these raffles, consumers buy tickets for the chance of winning a multimillion dollar dream house and other prizes. The tickets, usually $150 each, are expensive. But the odds of winning are better than those of winning the lottery. Your odds of winning one particular dream house raffle in San Francisco are one in 90,000 — pretty small, but not as tiny as the Powerball Jackpot lottery (one in 175 million ). The raffles offer other prizes such as cars, vacations and electronics, bringing your odds of winning a prize to one in 50.
But winning a dream house raffle may be disappointing, according to the Better Business Bureau. Here’s what the BBB says you should know.
The multimillion prize may not
materialize. Although some dream house raffles do deliver the promised grand prize (which may be as high as $4 million in cash), not all do. One 2013 raffle promised a $1.8 million home in Missouri or
the alternative of a $1 million cash prize. The grand prize winner walked away
with just $60,000 in cash, according to KMOV.com.
Though ads for the raffle didn’t make mention of it, the fine print on the raffle website noted that for the grand prize to be awarded, 45,000 tickets needed to be sold. In the end, the organizers sold just 8,000 tickets.
The warnings about raffle outcomes are hard to find. Dream house organizers don’t always warn consumers that the millions in prize money are not guaranteed — at least not somewhere consumers are likely to read it before they buy a ticket — notes the BBB.
“Is it disclosed in news releases and TV commercials, or is it somewhere at the bottom of the fine print on a website?” asks Bill Smith, an investigator with the St. Louis Better Business Bureau. “Our feeling is that they need to disclose that up front," he told SafeBee. "The mere fact that they refer to it as a house raffle and say that a house will be given away we feel is misleading and deceptive in those cases where it is not.”
Not all the money raised goes to charity. The BBB found that charities in at least two cases received only about 20 percent of the ticket sales after expenses, such as paying salespeople and advertisers.
You can’t write off the price of
the ticket as a charity donation.
The cost of a charity raffle
ticket is not tax deductible.
Property taxes for a dream house are exorbitant. Few people with low or average incomes are prepared to pay property taxes for an expensive dream house. If you accept the house in lieu of cash, you’ll be responsible for ongoing property taxes, which generally run up to 4 percent of the home’s value depending on its location. Even a 2 percent annual tax on a home valued at $2 million would be $40,000 a year. For this reason, always talk with tax and legal consultants before deciding on whether to take the house or cash.
Related: How to Create a Rainy Day Fund
Do your homework
If you still want to buy a ticket, the BBB offers this advice.
Know your charity. Before buying a ticket, visit the charity’s website to learn about its work. You can also obtain a charity review from the BBB by going to www.bbb.org.
Find out where the money is going. Ask
whether the charity is using a professional fundraiser for the raffle and how
much of the ticket price
will go to the charity to support programs. If you want
to make sure the charity gets the most bang from your bucks, make a direct
Don’t spend more than you can afford to lose. If you don't have $150 in disposable cash, don't buy.
Watch out if you go in with others on the ticket. Agree in writing on how to share the winnings. Dream house raffles generally recognize only one person per ticket.
Learn the odds. Ask the charity what the odds are of
winning any individual prize. Find out when the group announces the winners, and
make sure the drawing is held at that time.
“Look at the track record of the charity,” says Smith. “If this is their first time doing it, make sure you know what the rules are. Even if they have done it before, read the fine print and know that you may not be actually awarded a house or the cash equivalency. It could be something far short of that.”