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With home prices steadily dropping and foreclosures at an all-time high, the housing market has become somewhat of a gamble for homeowners trying to sell their homes. For this reason, some buyers are passing the gamble on to sellers by raffling off their homes.

Home raffles are rapidly gaining popularity across the United States and even overseas. Recently, a Maryland couple partnered with a local charity to raffle off their home. Tickets were sold for $50 per person for a 5,000-square-foot home that is valued at nearly $1 million.

So just how does this work? As per Maryland law, only charity groups can raffle off houses. The charity is required to sell at least 31,500 tickets to pay off the loans and keep its cut of at least 10 percent. When a lucky winner is selected, he or she wins the home. There are no broker fees, closing costs, or mortgage payments. The winner is responsible only for property taxes. And the couple who is raffling off the home walks away with the proceeds of the raffle, minus the charity’s take.

Even developers are savvy to the appeal of the home raffle. Barry Swenson Builder in San Jose, CA, agreed to raffle off a $1.2 million penthouse in the newly developed City Heights building earlier this year after the home sat on the market for over a year.

When InnVision, a local nonprofit agency that assists homeless families, asked Barry Swenson if he would help the homeless by raffling off a penthouse, he agreed, as the raffle would likely help market both his company and InnVision. Swenson would sell the agency the penthouse “at cost” and the proceeds of the raffle would go to charity. Tickets were sold for $150 each, and the agency needed to sell 18,000 to meet its goal. The grand prize, the penthouse or $1 million in cash, was scheduled to be raffled off at an InnVision event in October. The proceeds would help pay for programs that help 16,000 poor and at-risk people a year with food, shelter and medical assistance.

Unfortunately, the penthouse remains empty today because the agency was unable to sell enough tickets to make it worthwhile. According to Chris Miller, a San Jose Real Estate consultant, this is a typical outcome for home raffles. “Many people are reluctant to purchase such ticket raffles, especially in a bad economy,” he said. “Marketing is key. Agencies need to reach as many consumers as possible, by using the media, having a presence at events, and advertising. They need to extend purchase deadlines if necessary and be as flexible as possible. Even then, it is a difficult task.”

Fortunately, not all home raffles fail. A recent New York Times article highlighted the success story of how a couple sold their home by raffle. The couple sold tickets for $100 each for their farmhouse. They calculated how many tickets they needed to sell to walk away debt-free, and teamed up with a Real Estate agent and a local charity. After publicizing the raffle, posting flyers and getting the media hyped up, they sold almost 6,500 tickets, raising enough money to cover the cost of the house along with a surplus of more than $200,000 for the charity.

According to Miller, while marketing is important, obeying laws is even more important. Many states regulate raffles under gambling laws, meaning that home raffles are illegal unless the homeowner partners with a charity, and agrees to not accept more money than the appraised value of the house. Some states, such as New York, prohibit even charities from raffling off homes. Therefore, considering how much marketing is involved and how much red tape there is when raffling off a home, Miller believes this is not always a good strategy.

Despite the potential pitfalls, in markets where home prices are rapidly declining and homeowners have run out of options, raffling off a home can be a success. And for buyers, the idea of owning an expensive home for the price of a raffle ticket is appealing, especially since the odds of winning are usually reasonable.

To date, raffles have not been extremely popular, mainly due to the complexities involved. However, as charities and legitimate Real Estate agencies become more involved in this trend, it is likely we will see more home raffles in the near future.

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