Complete Property Info (Contract Signed)
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.
My friend Noah at UrbanDigs wrote an excellent piece today on the Buyer/Seller Disconnect (a MUST read for both buyers and sellers in today’s market!) and I couldn’t resist sharing my 2 cents. So after a lengthy comment on his blog post, I decided to make that comment a post of my own here on TG. So here it is:
Having lived through and more importantly brokered through the painful market in the early 90’s where homes took 2 or more years to sell and sellers were discouraged from given exclusives, I would like to make a couple of points about current market conditions:
1. Buyers with nerves of steel are getting some awesome deals right now and those who sit back and try to time the bottom of the market…well…good luck to them. I have signed contracts on 4 properties over the last 3 weeks. Asking price of $1.795M sold to my buyer for $1.3M. Asking price last year of almost $5M ($1M overpriced and should have sold last year for $3.7M) selling to my buyers for under $2.5M. One of my sellers who said he would never sell for less than $625K has a signed contract at $575K (as I say to my kids, "he’s a good listener"). Another seller is awaiting delivery of signed contract after a 3 week negotiation almost 20% below an already attractive ask. All of these deals are being partially financed (between 50 and 80% borrowed money) at very competitive rates from savings banks or portfolio lenders. CORRECTION…one of these deals is an all cash transaction.
2. I think that a seller’s agent who isn’t drinking the kool aid and actually provides the service of pricing ahead of the downward curve is a HUGE asset in this market. Just received an email yesterday from a seller’s agent informing me that the property has been reduced by 6%…I asked her what planet she was living on as the offer my buyer made 2 months ago at 20% below ask should have been countered and is no longer on the table. ALL bids must be analyzed and taken seriously if a seller really wants to sell. I have no desire to work with sellers who won’t listen to current market conditions.
3. There WILL be a price point at which more buyers come back to the market and the smart ones will do so before the lemmings. Credit will ease up eventually and further price depreciation (IMHO) will make buying Manhattan real estate almost irresistible (unless they don’t have a job which is a very real possibility). Maybe this is just wishful thinking. We shall see.
4. I believe that prices are down 20-25% from peak levels for deals that are actually getting done "today." What sold last month and certainly what sold 6 months to a year ago is absolutely irrelevant in today’s marketplace.
All of that said, buyer anxiety remains high (seller anxiety is peaking too) and I’m seeing buyers who receive accepted offers back out or attempt to renegotiate questioning whether they should have offered less. It will take a strong constitution for brokers, sellers and buyers alike to get through this real estate battleground but I’m seeing (anecdotal of course) some amazing deals getting done. It is ironic that everyone wants to buy a home or a stock (they should not be compared IMHO) when the value is climbing but everyone runs as values dip to attractive buy levels.
Complete Listing Info (Contract Signed)
Real Estate Connect NYC 2009 is just around the corner (January 7-9th) and I’m pleased to be speaking on a panel as part of the Digital Video Summit. My panel, 5 Killer Uses for Real Estate Video, will address production, use, and most importantly ways to profit from real estate video?
For more on Real Estate Connect, here is a personal invitation from Brad Inman:
Hope to see you there!
Complete Listing Info (Contract Signed)
I have just received notification from Dan Shlufman that the Fed cash infusion just caused 30 yr fixed rate loans to drop to 5.375%. He suggests that those buying or refinancing act fast since this is unprecedented and may go away quickly. If you currently have a rate over 6%, now is the time to refinance. Here is Dan’s offer for TrueGotham readers:
URGENT-HUGE RATE DROP IN INTEREST RATES
Yesterday’s infusion of cash into the banks by the Federal Reserve has resulted in an immediate drop of almost 1% in the interest rate on 30 year fixed rate loans. As of this moment (which may change at any time due to market volatility), interest rates on a loan of up to $417,700 are 5.375%! This is the lowest they have been since 2005 and almost the lowest on record. If you have a loan of this amount or less and a rate of 6% or greater, it makes sense to consider refinancing. As this may not last long, I suggest that people act fast and LOCK the rate. Do NOT wait and see if rates will go lower. Though they might, these huge drops tend to be short-lived and only last a few days.
As a service to True Gotham readers, and to protect the lowest rates, we will offer anyone who does a loan with us a free floatdown if they lock a rate and rates fall by another .25% after they have done so. This is a huge opportunity and the first good economic news in a long time!
You can reach Dan directly at www.fcmc.net or calling 973-574-0900.
It has become increasingly more difficult for me to post blog entries as current market conditions are keeping me quite busy. I’m not suggesting for one moment that I’m doing more business than I was in the recent past rather that the transactions on which I’m working are taking considerably more effort and energy. From buyers wanting to renegotiate prices and terms on accepted offers to frustrated sellers unwilling to accept that market conditions have changed, the challenges of today’s Manhattan real estate market abound.
That said, deals are being done but often not before an intense and lengthy negotiation process. What used to take as little as 24 hours (in those insane multiple bid days) can now take weeks before a contract is inked. And if a seller is fortunate enough to have a second bidder come along during that process, they must be incredibly careful and sensitive with their current buyer or often times they may end up with no deal at all. Many buyers are actually spooked by the presence of a second bidder and would rather not get involved with a multiple bid situation. Everyone is trying to figure out when the current anxiety will subside and transaction volume will increase but until then it takes a well-informed buyer AND seller to reach a meeting of the minds.
In the meantime, many of the deals on which I am working are either all cash transactions or less than 50% financing. What surprises most of the people I speak to is that financing at competitive rates is still readily available to qualified buyers from savings banks and portfolio lenders. "Qualified" these days has taken on new meaning as income and liquidity requirements as well as credit ratings have increased, but mortgages are available and so are some amazing deals. All of that said, although we are currently experiencing a challenging real estate market and it may not be the right time to buy for everyone, there are some incredible opportunities to purchase Manhattan property at very attractive prices. It’s only a matter of time before more buyers realize this fact and the market once again becomes competitive.
PLEASE READ THIS ENTIRE BLOG ENTRY:
WE DO NOT RAFFLE HOMES…so contacting us to assist you with a house raffle will be a fruitless effort.
Good Luck to all of you!
I’ve decided to re-post this blog entry because of the overwhelming amount of traffic that this site is getting from people interested in raffling their homes…a sign of the times indeed. Many have suggested that some sort of National Raffle could contribute to solving this country’s housing woes. An interesting concept. Below is the original post on How to raffle Your House followed by an update including a link to Charitable Gaming Laws for each state in the country (it seems Florida doesn’t allow raffles and might want to consider changing that legislation).
With housing markets slumping across the country, I have been receiving an unbelievable amount of inquiries in to just how to go about successfully raffling off your house. Since I have absolutely NO experience with such a house raffle, I posed the question to Bruce Anderson, CEO of San Mar Children’s Home and one of the successful orchestrators of such a raffle that took place in Hagerstown, MD. It’s not easy at all says Bruce but he graciously offered the following for anyone who is considering a house raffle:
Having just completed a very successful house raffle in which we raffled a house ($380,000) and a car in 77 days resulting in a $214,000 net profit for the charity we have been besieged with calls and emails from all across the country asking us to tell others how to do it. The Maryland Secretary of State, the office issuing the required permit to conduct a house raffle, tells us that since the conclusion of our raffle they have been receiving more permit requests than ever before from persons who desire to replicate what we have done. Unfortunately, most will fail.
Conducting a house raffle is a high-risk adventure with no guarantee of success. With that having been said let me share a few of the observations, if not actual lessons, gleaned from our recent experience:
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Do your homework ahead of time. Many raffles fail due to the persons beginning without a good understanding of what is involved in the process, and therefore plan improperly.
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Get the right nonprofit from the outset. Each state is going to require that the raffle be conducted by a nonprofit organization. If you are the homeowner it is vital to match up with a charity that has the ability to accomplish such an event. How can you tell? Well, as stated earlier there is no guarantee, however, look for the following: Do they have a track record of knowing how to raise money? Do they have an active board that believes such a project can succeed? Are they as a board willing to work to make it successful? Have they helped other projects of the organization? Do they have connections to the media? What is their reputation in the community? What is their appeal to the broader community beyond the local area? Do they have vision for their organization?
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Beware of narrow marketing. Market beyond your local community. Many raffles fail due to marketing only to their own community. One of the biggest mistakes is to not allow enough time to complete the project. Typically a house raffle should take between six and eight months. That may be true, however, we completed ours in 77 days due to marketing beyond our own community. Additionally, do not limit marketing efforts to any one or two actions. For example don’t think sending letters to your mailing list and a letter in the paper is going to sell all your tickets. Get as creative as you can and generate as much momentum as possible in as many ways you can. Some of the things we did: Sent a mailing to our mailing list, put up posters all over the county, contacted the local paper and convinced them of the interest behind a family raffling their home (we ended up with 6 front page – Sunday editions that specifically talked about he story), The local TV station picked up the story, AP press ran the story opening the door to numerous newspapers around the world, we ran a story in the Chamber of Commerce newsletter, we spoke before service groups, we wrote of the event in numerous blogs, we contacted radio stations all over America and shared how we had a AP story of interest. That lead to numerous interviews. One radio station in Florida followed the story regularly interviewing the Realtor we worked with at regular intervals. These are just a few!
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Set up a website for on-line (secure) credit card purchases. Have this in place as soon as you are ready to go. We had our website and credit card processing system in place but not before the local paper ran a front page story of what we hoped to do. We were able to contact an Associated Press reporter and convinced him to pick up the story. The problem was that the story went national before we had a permit. We simply took orders and did not process any cards until the permit was in hand. Include on the website a counter that gives regular and accurate feedback as to the progress of ticket sales. We were amazed at the number of people who were following the progress daily (We also set up a stat counter on the website).
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Pay absolute attention to details and use integrity in everything. We maintained meticulous records of every ticket sold. We kept all ticket stubs in alphabetical order so when someone called and told us they purchased a ticket on-line and never received a stub in the mail we were able to at once find their records and get a copy to them. At the end, the day of the drawing, we turned everything over to a CPA firm and had them conduct an audit on all the tickets so that we could testify to the truth of a ticket being in the barrel for every person making a purchase.
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Determine to enjoy the process and attack every obstacle with tenacity!
These are just a few of the things we did and learned. Will we do it again? We have certainly been asked … we shall see!
Bruce T. Anderson, CEO San Mar Children’s Home
Thanks so much Bruce for your time and energy in providing these excellent tips.
And to those considering this as means to unload your house…
REMEMBER…IT AIN’T EASY!!!
Update November 2008:
The amount of traffic to this site and this post specifically has been overwhelming and a strong indication of the masses of people who are struggling to sell their homes. Since I have no personal experience with running a successful house raffle and certainly can’t help anyone raffle their home, I am offering the following link that I think is the best place to start to determine the state office that you must contact in order to get the proper permits/licenses to hold a charitable raffle.
State Charitable Gaming Laws <—this is the LINK
Update December 2008:
Please read The Sad Truth About House Raffles. Most of these raffle attempts are failing.
