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Q: |
How much money does the original home owner walk away with after doing a home raffle. |
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| A: |
This depends on a few factors:
- How much the home is appraised for (normally that is what the home owner will get for the purchase of the home)
- What is owed on the house? (mortgage, home equity loans, any liens.)
- What the state law says you can get for the sale (normally the appraised value)
When a person chooses to raffle off their home, it is almost like saying, you are going to sell your home to the non-profit organization for the purposes of them giving it away. The transaction between the homeowner and the non profit is just like any other regular house sale/purchase. The only difference is that the state law sets the price that can be given to the homeowner. In most cases this is the amount that the house appraises for.
Example: Let's say that a home is appraised at $300,000. The homeowner still owes 200,000 on the home. In addition they also took out a 30,000 home equity loan. Lastly there is a tax lien for 2,000 on the house.
If the homeowner were to sell the house in a normal transaction, the buyer would give them 300,000 for the home. From that the homeowner pays off the mortgage, the home equity loan and the tax lien; the rest would be the profit for the homeowner.
Here are the calculations:
200,000 + 30,000 + 2,000 = 232,000 (total of what is owed on the home)
300,000 - 232,000 = 68,000 (would be the profit from the sale of the house)
With a home raffle, it is the same thing. The only difference is that your buyer is the non-profit. Their intention is to buy it and give away. So they need to sell more tickets then just enough to cover the cost of the house. They have to sell enough tickets for them to make a decent profit for all of the work that they have done. Nothing changes for the homeowner!
When you enter into the Legal Agreement with the non-profit to do a raffle, you will know how much money you can make if the raffle succeeds. Your only concern is that the target goal for ticket sales is met, thus providing a successful raffle. That target goal is set between you and the non-profit and is most likely spelled out in your contract.
The biggest thing that you want to check to see is, what does the state say you can get for your home. Once you have found your non profit, you can look into this together. But for the purpose of seeing if a home raffle is for you, use the scenario of getting only what your home will appraise for minus what you owe on it.
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