Bulletin 1981 V12-3
Faced with the challenges of buying and selling homes in today's real estate market, brokers and homeowners are seeking alternative ways to bring about sales. One such marketing technique which has recently received national attention is the "raffling" of homes, where a civic or charitable organization (Rotary Club, volunteer fire department, etc.) would sell raffle tickets to the public (often with the assistance or participation of a real estate broker) and would then retain all money collected in excess of the sale price of the home and expenses of the sale (including broker commissions).
While the Real Estate Licensing Board does not wish to discourage the use of creative sales techniques, the use of raffles or lotteries in the sale of real estate is of great concern to the Board because of serious legal questions which are raised and because of their negative consequences on the winners of such raffles *
First, it is unsettled whether real estate raffles are legal under any circumstances in North Carolina. Lotteries and raffles are governed by a criminal statute, and opinions differ as to whether a raffle of a house is permitted under the law. Pending a definitive court decision, the district attorneys in the state have taken varying positions as to the legality of real estate raffles. The Board's subsequent comments, therefore, assume that real estate raffles may be legal under some circumstances, but the Board makes no warranty or guarantee whatever that raffles will be permitted in any judicial district in the state. [Persons interested in raffles should first contact their attorneys.]
What is clear from the statute is that only a recognized tax-exempt organization may conduct a raffle, and that "no person may be compensated in any way for conducting a raffle." Therefore, the Licensing Board takes the position that, assuming a raffle is otherwise legal, real estate agents may participate in such raffles only on a gratuitous basis. No real estate agent may receive any sort of fee ' commission or other compensation whatever for participating in or conducting a raffle.
Finally, the Board feels that licensees and the public should be aware of the tax consequences of winning such a raffle. Although any participant in a raffle should consult his own tax adviser, generally the winner of the house will have the fair market value of the house counted as ordinary income to him in the year he wins the raffle; for most winners, this would create a large income tax bill due the following April 15th. Further, when the winner decides to sell the house, his cost basis for capital gains purposes will be the amount of the ticket, rather than the value of the house; in most cases, this will create a large capital gains tax.
The Licensing Board feels that real estate raffles are a dangerous practice, fraught with pitfalls for buyer, seller, and broker alike. The Board therefore strongly discourages its licensees from participating in such activities, and offers them no assurances whatever that such participation is legal.