This practice, involving one essay, one entry fee (normally less than $150) and a tenacious attitude has been around since our ancestors in New England have had a need to disperse property.
Two modern–day examples:
In 2004, Claudia Johnsen, a 79-year-old resident of Alexandria, Va., offered to give away several plots of land and pre-existing homes in Virginia to essay contest winners. The prizes? Two condominiums in Alexandria, a waterfront strip in Stafford County, a vacation house near Hot Springs, Va., and one-third interest in a Temple Hills apartment complex.
One day, while watching Oprah, Johnsen witnessed a guest telling a story quite similar to hers, except the guest had profited from selling an inn. She thought it was a fascinating idea, and contacted Oprah's guest. She bought the contest rules for $750 and after making a few small changes to the policy, she organized her own online raffle.
Contestants would have to submit a $100 entrance fee along with an essay of 75 words or fewer explaining why they wanted to own one of the estates.
Example 2:
Wesley Ludlow and his wife, J.J. Rodgers, were unable to sell their 4-bedroom, 2-bathroom house because of the dormant real estate market in their hometown of Red Feather Lakes, Colo., the Washington Post reported.
They decided they needed a solution to the problem of having a second mortgage, and wanted to sell the home that had been sitting by its lonesome since they built a newer home closer to town. They chose to try and raise $200,000 by asking for essays of 500 words or fewer and a $100 entry fee.
They determined that if they could not get over 2,000 entries they’d return to selling their home the traditional way.
Why is this interesting--aside from the oddity of it all?
At first glance, while this may look like a gamble, the end result is in the hands of the seller. They stand to profit from the entry fees at a price far beyond what many of these homes could originally appraise for. Of course, the risk lies in how the contest is marketed. Websites have been established to market and advertise these contests, but many are out of date and don’t target the right types of people.
In the end, Johnsen could earn several million dollars more than it’s appraised value for her estate as a result of her marketing efforts. The estate has been appraised at $3.7 million.
Johnsen is unsure how much money she will make at the end of the deal because overhead costs are often unpredictable. State Government determines the maximum number of entries that can be accepted, but Johnsen determined the minimum and holds the power to cancel the contest if she chooses.
The jury is still out for Ludlow and Rogers, who have not yet chosen an essay winner. If they meet their requirement of 2,000 essay submissions, they plan to put the surplus money towards their children’s' college educations.
The clear benefit for investors is the ability to simply settle their estate issues and potentially profit from selling real estate in an otherwise fairly stagnant market without picking up the phone to call a real estate agent.
The question? Who's keeping Uncle Fred from winning the house?
Labels: finance , investments , people , real estate
