Readers of TrueGotham know how excited I have been about the apparant win-win-win formula that comes from raffling a house. The owner gets out from under a mortgage, a charity benefits from the money raised above and beyond the mortgage or appraised value amount, and the winner gets a home for the price of a raffle ticket. I have absolutely acknowledged that the winner also has to pay taxes on the winnings but never dreamt that would be such an obstacle.
First, I’m very sorry to report that it seems as if more than 90% of attempted house raffles have failed. In Maryland where the SanMar raffle of a house in Hagerstown was a "success," the 10th house raffle of the year is being attempted and according to the Maryland secretary of state’s office only the one in Hagerstown, has been "successful" so far (via Washington Post).
So what defines a successful house raffle. In my opinion it would be where the mortgage is paid, the charity makes money and the winner can either afford the taxes on the winnings or sell the home for a profit above and beyond the tax liability. So by that definiton, the Hagerstown raffle was NOT a success…at least not yet. Check out this report on the SanMar raffle winner from WJZ-TV in Baltimore:
Kelly McPherson reports selling a house is getting tougher, even if you won the house for a $100 charity raffle.
That’s what happened to a Hagerstown man earlier this year, and now he’s stuck with a house he can’t sell to cover the costs of his win.
Who would have thought that winning a home in a charity raffle would turn out to be a curse?
"Up until last night, I never regretted buying the ticket. Now I’m a little worried," said Dennis Weaver.
A sad ending to what appeared to be a wonderful story. With many housing markets across the country still in decline, the risk of winning a home that’s value can quickly become less than the tax liability may become a reality. When I purchased my tickets for the Hagerstown home, I first saw it as an opportunity to help SanMar but I also thought that if I won, I would be able to sell the home for about $50,000 more than the taxes due. Thank goodness I didn’t win! Because of this tax issue, many are coming up with creative ways to circumvent this problem.
New Jersey resident and homeowner Jacquie Davies has come up with what may be an ingenius way to conduct home raffles without the burden of the tax liability on winnings. On her web site ownahomefor100.com she asks that "entrants" pen a 50 word essay on what homeonership would mean to them and their family and send a $100 "gift" for the opportunity to be selected to purchase her home for $1. It’s a very interesting design and she is donating part of the proceeds to Save The Animals Foundation. I wish her the best of luck as she is even considering petitoning congress to change the laws regarding house raffles to enable more homeowners to avoid foreclosure.
It remains to be seen if someone will develop a way to truly make the house raffle a win-win-win and a viable means for underwater homeowners to move on with their lives.