Baltimore, MD, January 26, 2009
Before his historic inauguration, US President, Barack Obama’s transition team launched the “Citizen’s Briefing Book” on their change.gov website which allowed ordinary citizens to suggest their ideas and opinions on issues facing the new administration.
Ser Greene, USAHomeRaffle.com Co-Founder says, “The concept of home raffles is something that we feel can have a major effect on the US economy, thus we submitted the following letter to him that explains the raffle process and how it affects ordinary Americans and the government. Our goal in this effort is to give the new administration (and the American public) an idea of the full spectrum of how home raffles can affect the economy.” The following letter is a copy of what was submitted to the “Citizen’s Briefing Book”.
“The USA Home Raffle Plan in Every State”
Good Day President Obama,
I would like to suggest to you something that is already being done. Something that is proven to work and something that many people in our country don’t do; either because they don’t know or their state law doesn’t currently allow for it.
It is called a Non-profit organized and run, raffling of a home. In the state of Maryland, the laws for doing home raffles are extremely clear cut and laid out. Because of this, there have been many successful home raffles in this state. When a home raffle is done correctly there are many benefits to everyone involved, including the local, state, and federal levels of government. To say it is a "Win Win" is an understatement. To give you a full explanation of the effect of a home raffle, let me use a fictional situation based on a home raffle from Maryland.
Let's say you are a home owner and you decide to put your house (which appraises for $300,000) on the market. Your mortgage payoff is currently $220,000. After 8 months on the market, you have only been offered $250,000 by one interested buyer. Other buyers have offered, but have been unsuccessful in obtaining a mortgage. Given this, and the declining economy, you are not satisfied that your home will sell at its appraisal value. In addition, you need at least some of that profit to move into your new home.
A friend tells you that with the help of a Non-Profit organization, raffling off your home is a possibility. You connect with a grassroots Non-Profit Organization that agrees to raffle off your home. You sign a contingency contract to bind everything and the Non-Profit organization begins to sell 8,000 raffle tickets at $100 each.
The day of the raffle arrives, and a lucky family is awarded a home with no mortgage responsibility. (Note there are taxes to be paid here!!! We will get to this at the end.) At the same time, the Non-Profit organization purchases your home at its appraised value (Not the market value, not the amount the home owner owes, but the amount that a REAL appraiser says the house is worth!!), In this case, that is $300,000 and it leaves you, the homeowner, with $80,000 cash profit!
The Non-Profit organization pays any expenses with regard to conducting and marketing a successful home raffle. (Those things include items like closing costs, marketing expenses to get the word out, legal fees and so on.) When all debts are settled, the Non-Profit organization is left with the remaining balance to continue its philanthropic work in the community. Let say their costs were $100,000 total, they would be left with $400,000 profit.
$800,000 (from ticket sales)
minus ($300,000 for house + $100,000 for other expenses)
= $400,000 profit
Even if they didn’t make their goal and they only sold 6,500 tickets. They would still have cleared $250,000.
Let’s look at the big picture and what happens to the economy here:
- There was a settlement when the home changed hands from the original home owner to the non profit. Title companies, real estate attorneys, and mortgage companies all found work and were paid in order for the settlement to happen.
- The previous homeowner can now move on to the next location and purchase their new home (another settlement will happen--realtors, title companies, real-estate attorneys, mortgage companies will be involved.) More money moving throughout the economy.
- The non profit organization sells all of the required tickets and gives the home to the winner (another settlement happens, realtors, title companies, real-estate attorneys, mortgage companies will be involved).
- That new home owner just won a home. A home that they don’t owe anything on. However, just like when you win the lotto, the government takes a good portion of the cash. In this instance there is no cash to take, so the new home owner has to come up with money for taxes assessed on the value of what they won. For most Americans this means getting a mortgage. Let’s just say that the total amount of taxes they need to pay is 50% (We're not accountants - but for argument's sake, let’s use a high number.) That's a $150,000 mortgage they would need to get on a home that is worth 300,000. At about 50% to value, just about any mortgage company would easily give a qualified winner that loan. (Another loan for that mortgage agent) Bare in mind this is $150,000 that goes to pay taxes *** To the Local, State, and Federal Government. ***
This is lot more money that the government would have received during the standard sale of a home!!
- The non-profit now has the additional funds it needs to do more of its philanthropic work in the community. (A lot of money is being spent in the local economy)
- The raffle winner (new home owner) has a mortgage bill that quite easily affordable. Because of this, the possibility of them not making the mortgage payments, gas & electric payments is low. Life is now affordable again!! It becomes much easier for them to buy furniture for the new home, or any other items which help to make life more enjoyable. Because of this, more money is spent in local establishments, bringing an increase to the local community's economy!
This process is the way it would work for a Maryland home. Many other states have similar laws but not all. My major suggestion to you would be to ask all states to adopt the same methodology for doing raffles as Maryland. Doing so would open this up for a world of individuals and non-profit organizations.
In addition, we ask you to encourage the non profit organizations to focus on homes that the average American can afford to live in. Not the million dollar or 2 million-dollar mansions that we often see raffled off, but the homes that are within 100,000 - 400,000 in value. This allows for the non-profits to sell a much lower amount of tickets and still make a sizeable profit.
As the past president of my community association in Baltimore, Maryland, I can empathize and respect your involvement with grass roots organizations. When you look at this home raffle possibility, you see the effect that well organized local organizations can have on the bigger picture. We just need to educate everyone on the possibilities, spread the word about what is doable and to ask more and more states to allow this process to happen in this manner.
Is it the total fix for the economy? No it isn’t; but it is a major step forward with different thinking and a real possibility for making change.
I hope you will consider this.
Respectfully submitted,
Ser Greene
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