Auctions are legal, but the scope of lotteries is very limited when it comes to selling a house, said Charlene Moody, chief deputy counsel of the N.C. Real Estate Commission.
With auctions, “We always direct people to the (N.C.) auctioneers board and advise they consult a licensed auctioneer,” Moody said.
For more information on the N.C. Auctioneers Licensing Board, click here.
As for lotteries, real estate could not be offered as a prize under any circumstance until May 2009, when the N.C. General Assembly amended an existing law to allow real property to be offered as a prize in a raffle by certain organizations — specifically, nonprofit organizations or governmental entities.
“While it is legal, there are very, very limited circumstances. The individual seller just can’t decide to do a lottery,” Moody said.
Moody wrote in a communication to Realtors that the commission frequently receives calls from licensees and homeowners seeking alternative ways to generate sales.
Some callers want to raffle their home by selling raffle tickets. The winning ticket-holder would then receive the property, and the seller would receive the proceeds.
But the recently enacted statute authorizes only nonprofit organizations or government entities to conduct raffles, Moody writes.
“The maximum appraised value of the real property to be raffled is $500,000 for any one prize and the total appraised value of all real estate prizes offered by one nonprofit organization may not exceed $500,000 in any one calendar year,” she writes.
Some sellers may wonder if they qualify if they donate a portion of the raffle proceeds to charity.
The statute, however, stipulates that proceeds of the raffle “may not be used to compensate any person to conduct a raffle,” Moody writes.
“The commission, therefore, takes the position that the seller may not receive any part of the raffle proceeds nor may a licensee receive any fee or commission from the raffle proceeds,” Moody writes.
A person conducting a raffle in violation of N.C.G.S. §14-309.15 would be guilty of a Class 2 misdemeanor, she writes.
“Additionally, licensees and the public should be aware that there may be surprising tax consequences of winning a real estate raffle. Licensees should advise any participant in such a raffle to consult a tax adviser concerning the tax consequences to the winner. For example, in the current tax year, the home may be reportable as ordinary income, leading to a large income tax bill,” Moody writes.
“Further, when the winner decides to sell the home, he or she may encounter a large capital gains tax because the cost basis for the home will be the ticket price rather than the value of the home.”
Date posted: August 3, 2010
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