Can You Raffle Off Real Estate?

November 7, 2024 Jaclyn Bickerton

We’ve recently had several inquiries from companies looking to use a raffle for a chance to win real estate. While a raffle may seem like a simple method to raise money, that’s simply not the case. Raffles are subject to various laws and regulations regarding who can run one, how they can be run, and where they can be run. Raffle laws vary by state or province; however, it is illegal for an individual or a for-profit business to run a raffle (with few exceptions).

If your business doesn’t meet the requirements to run a raffle, a sweepstakes is a perfect alternative. Offer a paid entry method to earn funds, but keep in mind that you must also include a no purchase necessary method of entry (an alternate method of entry, or AMOE).

Sweepstakes entries can be sold nationally, allowing you to reach a larger audience and generate more revenue from the sweepstakes. While sweepstakes have their own set of rules to adhere to and their own reporting requirements, the restrictions are much more reasonable.

Offering Real Estate as a Prize

While real estate may seem like a highly sought after prize, there are many variables to take into consideration. Some common roadblocks of offering real estate as a prize include:

  • Property Ownership Complications: The property must have a clear title, with no existing liens or legal issues. It might be advantageous for a winner to conduct a judgment and lien search on the property prior to accepting it. Otherwise, as the new proprietor, the winner might be responsible for payment of any back taxes and debts.
  • Location-Specific Restrictions: Zoning laws, regulations, and legal restrictions vary by jurisdiction of the property. These laws govern how the property can be used, transferred, or modified and may include restrictions on property types, occupancy, or even the transfer process itself.
  • High Transfer and Tax Costs: Winners may face substantial tax liabilities (income tax, property tax, etc.) and transfer fees upon winning the prize. Some companies will offer cash in addition to the property to help offset some of these costs.
  • Winner Suitability: Winners may lack resources to maintain or live in the property, leading to complications.

To prevent confusion and legal issues, these potential roadblocks should be clearly detailed in the promotion’s Official Rules, ensuring participants are fully informed before entering the sweepstakes.

For more information on the legalities of running a raffle in the United States or Canada, visit: https://www.raven5.com/blog/thinking-of-running-a-raffle.

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