A 23-year-old woman has won a £545,000 Shropshire farmhouse after buying a £2 raffle ticket.
The winner, Jemma Nicklin (pictured), had been living with her parents when she spotted the house raffle on Facebook and decided to enter. The prize draw resulted in Ms Nicklin winning a four-bedroom home near Shrewsbury, with stamp duty and legal fees covered as part of the prize.
We believe this is only the second time a UK property raffle has actually resulted in someone winning a property. The previous instance was back in 2017.
The vast majority of other property raffles have either been shut down by the UK Gambling Commission (UKGC) for failing to comply with gambling laws, or have awarded a cash prize after failing to sell enough tickets to cover the value of the property.
Here we explain what you need to consider before entering a property raffle, and other more likely ways of working towards owning a home.
House raffle target met in a week
The Shropshire house raffle was run by Michael Chatha, 54, who had previously tried and failed to sell the house on the open market after his marriage ended.
Unlike many other property raffles, the competition was hugely successful. Mr Chatha said that ticket sales exceeded £550,000 in the first week alone.
Admin assistant Jemma Nicklin, whose winning ticket was drawn at random on 14 February, said she was still in shock after winning the 300-year-old home and hasn’t yet moved in.
How popular are property raffles?
According to UK competitions portal Loquax, 15 property raffles have closed since the beginning of 2019, and two are currently still open.
This kind of competition first became popular back in 2008, when homeowners who were trying and failing to sell during the recession were looking for a way out of the property slump. It made a comeback in 2017, after a raffle successfully gave away a six-bedroom house near Manchester.
The success of the Shropshire farmhouse raffle could help boost the popularity of house raffles with first-time buyers desperate to get on the property ladder.
This could be enhanced by the recent guarantee from London-based company Raffle House that it will give away a £500,000 east London property later this year, regardless of the number of £10 tickets sold.
Raffle House was found by the Advertising Standards Authority (ASA) to have run ‘misleading’ ads last year after it failed to give away a property it had advertised as a prize.
Things to consider when entering a property raffle
As tempting as the idea of winning a property with a raffle ticket might be, make sure you know exactly what you’re getting yourself into before parting with any cash or giving away your personal details.
Read the competition’s terms and conditions carefully and make sure you know the answers to the following questions:
1. Is the competition legal?
Which? has previously written about the fact that property raffles can fall between the cracks of regulation, and this is still the case.
The UKGC has the authority to check whether raffles are operating as illegal lotteries, and many competitions have been closed down on this basis. But it does not regulate ‘prize competitions’ that require some form of skill or judgement (such as a quiz question) to enter.
The ASA has oversight of competitions’ marketing activities and has previously stepped in on several cases of misleading advertising that breached what is called the CAP Code – which covers non-broadcast advertising, sales promotions and direct marketing communications.
But despite this regulation, there have been cases of competitions closing without awarding any kind of prize or giving entrants their money back.
When dealing with an unknown company, there’s no way to be sure how legitimate a competition really is, but as a precaution we’d suggest checking to see whether it’s registered with Companies House, and also whether it has a professional-looking website and positive reviews from other customers.
2. What happens if too few tickets are sold?
Most property raffles have a minimum number of tickets that must be sold for the property to be given away, as organisers will have costs they need to cover.
Make sure you’re aware what will happen if the minimum number of tickets haven’t been sold by the closing date.
The competition might simply be closed and the ticket money refunded. More commonly, a lesser cash prize will be awarded in place of the property – but the company organising the competition may also take a significant cut of the proceeds.
The Shropshire house raffle’s T&Cs stated that if the minimum number of tickets hadn’t been sold, it would have retained 10% of the entry fees to cover admin and marketing costs, and given the remaining 90% to the winner.
By comparison, Raffle House kept 50% of the proceeds of its first competition, in addition to other costs.
3. Will you have to pay stamp duty?
This is a serious consideration. If you win a property raffle and the stamp duty isn’t included as part of the prize, you could be landed with a hefty tax bill.
We’ve previously found T&Cs stating that if the minimum number of tickets wasn’t reached, the property may still be given away but the stamp duty costs wouldn’t be covered.
If the Shropshire property raffle hadn’t covered the winner’s costs, she would have been liable to pay £17,250 in stamp duty, based on the valuation of £545,000.
If someone who already owned a property had won, and they didn’t sell their existing home, the Shropshire house would be liable for second-home stamp duty meaning a stamp duty bill for £33,600.
That’s a serious amount of money, so it pays to go through the T&Cs with a fine-tooth comb before entering a property raffle.
4. Are all other fees covered?
Check whether things such as conveyancing costs will be included as part of the prize. If not, you may be liable to pay them yourself.
It’s also important to know whether the prize is a leasehold or freehold property. If it’s a leasehold, check how many years are left on the lease, and whether any extra service charges or ground rents apply.
Which? has previously investigated the leasehold scandal and found that ground-rent-doubling clauses and punitive permission fees have rendered some properties unsellable, so make sure any properties you’re involved with are free of these issues.
More reliable ways to get on the housing ladder
While there’s no harm in taking a punt on a property raffle for fun, if you actually want to buy your first property, the schemes below are more likely to help you get your first set of keys.
Help to Buy equity loans
This government-backed scheme offers people equity loans, meaning they can take out smaller mortgages. How much you get depends on whether you’re buying in London, England, Scotland or Wales. Help to Buy is currently unavailable in Northern Ireland.
The loans are only available on new-build properties, and require you to put down a deposit of at least 5%.
Shared ownership
The shared ownership scheme allows first-time buyers to buy a share of a property (between 25%-75%) and pay rent of up to 3% on the rest.
You typically need to put down at least a 5% deposit and pay for the rest of your share with a mortgage.
Your household income must be less than £80,000 if you live outside London, or £90,000 if you live in London.
First Homes scheme
Not yet launched, the First Homes scheme was originally proposed in the Conservative Party manifesto, and says it will allow first-time buyers to buy a property in their local area for an average of nearly £100,000 below market value.
Armed forces veterans and key workers such as nurses, police officers and firefighters will be given first priority.
The government has launched a consultation, running until 3 April, into the plans.
Guarantor mortgages
A guarantor mortgage allows you to borrow up to 100% of a property’s value, and the loan is then offset against the guarantor’s home or savings as security.
Typically, guarantors are parents or other relatives of a first-time buyer.
The downside is that guarantors must agree to be liable to cover the mortgage payments if the homeowner defaults and, in extreme cases, the security of their own home can be put on the line.
