Article by Amy Passmore of DIY Fundraising.
You’ve heard of “dream home giveaway” fundraisers. A charity or non-profit organization raffles off a home and raises hundreds of thousands of dollars. Well, many homeowners would like to do this with their homes in order to solve their financial problems. However, individuals cannot hold these types of fundraisers unless they partner with a registered nonprofit organization. This article explains why this is happening and how it can be done.
In the past year home values, along with home sales, have declined. At the same time many homeowners who had adjustable rate mortgages saw their monthly mortgage payments dramatically increase. This has created financial hardships for homeowners who are both unable to pay their increased mortgage payments and are unable to sell their homes to get out from under their mortgages. In some cases homeowners are stuck with owing more on their home than it is worth.
This situation has lead to a sharp increase in home foreclosures and bankruptcies in the United States. In times like these people are looking for ways to solve their financial problems. Desperate homeowners have been the target of scammers claiming home raffles are an easy way out. Homeowners have been told that they can easily raffle off their home and raise enough money to pay off their house and donate the rest to charity.
This may sound like a great idea, however, there are legal issues involved in this that homeowners need to investigate before considering a home raffle. There is a difference between an individual raffling off their home and a licensed charity holding a “dream home” raffle. In most states it is considered illegal gambling for an individual to raffle off their own home.
There is a way for an individual to raffle off their home and that is to find a qualified nonprofit organization that is willing to be a partner and handle the raffle. In most states it is legal for a nonprofit organization to hold a raffle for charity fund-raising. Homes that are raffled by charities are usually new or in extremely good condition. A charity is not going to raffle off a run down fixer-upper. The charity will sell a certain amount of tickets at a price of, for example, $150 per ticket with 10,000 tickets being sold. The charity will bring in $1.5 million if all the tickets are sold.
The charity will have to make enough money on ticket sales to pay off the mortgage and cover all expenses such as legal fees, administrative fees, advertising costs, and other prizes. If a certain amount of ticket sales are not reached the raffle will have to be canceled and the money refunded to the ticket purchasers.
If the raffle is a success and the required number of tickets are sold, then the house will be given to the holder of the winning raffle ticket. The winner will then have to pay income taxes on the value of the house. This person will either have to pay a large sum of money to the Internal Revenue Service or will have to take out a new mortgage to cover the taxes. The charity will keep all the money that is leftover after all expenses have been paid.
All of this has to been done strictly according to the law. The charity should make sure that a lawyer and an accountant oversee the entire process. The homeowner should also have his own lawyer representing his interests. At the end of it all what does the homeowner get out of this? He gets his home sold as well as an income tax deduction. This may be a viable option for homeowners who are facing foreclosure.
Are you looking for ideas on how to raise money for your school, charity or nonprofit organization? Visit www.diyfundraising.com for more great tips and resources from an experienced fundraiser.
