Raffles: Latest wrinkle in the costly housing market

Somehow the Lion's Club raffle at the annual Fourth of July parade never looked this good. But then again, you didn't have to spend $100 there to get in on the action.

Yet that $100 ticket price hasn't deterred the thousands of would-be homeowners across the United States who are latching onto this latest way of beating the high cost of buying a home -- house raffling.

While this most recent real estate caper may appear more fad than anything else, such raffles are growing in popularity.

And no wonder. With the average American home costing a pricey $84,000, and the average cost of mortgage money (if you can get it) hovering at a forbidding 17 percent, many Americans are putting their dream of home ownership on the back burner.

Which all but spells bad news for those fortunate enough to already be homeowners. Should you want to sell, qualified buyers may be difficult to come by.

But most people already know these dreary statistics.

One man, however, refused to be shackled by such economic constraints. When John Redman wanted to sell his five-bedroom, $100,000-plus house in a Washington , D.C., suburb earlier this year, and found no viable takers, he did the next best thing -- he printed up 2,000 tickets and raffled it off.

Mr. Redman now owns a new home in New Jersey. And Nathan Price Jr. of Camp Springs, Md., now owns the Redmans' old house -- and all for a $100 wager.

The unorthodox transaction seems to be catching on. Other house/condo raffles have already been held, and several more are scheduled for this fall. At least four homes in the New England area alone should change hands by Thanksgiving because of raffling.

Lest frustrated home sellers think that raffling is the greatest thing since 9 percent mortgages, certain caveats regarding the beat-the-system sale deserve attention.

Undoubtedly the biggest deterrent to mass raffling of hard-to-sell homes is the fact that such raffles are illegal. In no state can an individual hold any kind of raffle, let alone a raffle for real estate.

What is necessary is that a charitable organization intercede in behalf of the home-owner, as Mr. Redman arranged. By buying the house from the owner, and conducting its own raffle, the charity bypasses the illegality of such a transfer. The owner gets his asking price, the winner gets the house, and the charity gets a percentage of the money collected.

Even with such a deal looking pretty sweet on paper, many states, including Maine, New Hampshire, Connecticut, New Jersey, Pennsylvania, and California, still ban such raffles. By prohibiting any raffling of real estate, or by clamping a lid on the value of an item to be raffled, such exchanges of houses and property, even under the auspices of a charity, are pretty much squelched.

But not all states frown on such creative exchanges of property. Illinois, Massachusetts, Virginia, and Rhode Island are four states that condone, or at least permit the raffling of houses by a charitable organization under certain circumstances.

Whatever the law, the offices of states' attorneys general admit to being deluged with calls from hopeful rafflees. David Harrigan of the New Hampshire attorney general's office says that "scores of people have called in requesting information." The Massachusetts' attorney general's office reports more than 100 enquiries in the past few months.

Beyond the question of raffling legality, attorneys general are also raising a few red flags about the process in general. Not only must a charity be ready for a major sales effort, but it must also be prepared to return all the money should an insufficient number of tickets be sold. All that takes time and money , and a small charity can actually lose money.

A boys club in Hudson, Mass., for instance, has sold only half of the 1,500 tickets necessary to the raffling of an $80,000 house."It's been quite a bit of work [selling the tickets]," says the club's attorney, adding that federal laws prohibit advertising the raffle through direct mail, television, and radio. Expenses for the charity are expected to total some $20,000 when the raffle is completed.

Charities are also liable should the winner not be satisfied with the house. And the winner himself must be prepared to immediately assume payments on the mortgage and all taxes. Losers in the raffle often mistakenly assume that their says, although he admits "I hope never to be in such a position again."