Be Cautious in Staging a Contest to Give Away a House

Scott Roth and Grace Reiner tried to sell their home for almost a year--to no avail.

Now, they’ve decided to try to get rid of their home by organizing a “contest” to give it away.

“We weren’t getting offers that we felt reflected the value of the property,” said Roth, a Studio City attorney and former “Jeopardy!” TV show contestant. That’s when he and his wife--also an attorney--came upon the idea of staging a contest. For $75, contestants get a list of questions to answer and the opportunity to win a 12-room, 3,000-square-foot home in the hills near Universal City.

Roth and Reiner aren’t alone. Several other homeowners in the San Fernando Valley are contemplating similar contests. But before buying a ticket, be forewarned. There isn’t a record of even one such successfully concluded contest in California.

The Roth/Reiner “Your Ticket to Hollywood” contest features 25 questions that Roth characterizes as “fun, offbeat and provocative.” These include ones as basic as how long the ocean tour on “Gilligan’s Island” was supposed to be, and another on whether the metal tip of a shoelace is called a tang, kerf, platen or aglet. The questions are designed to make the contest a legal test of skill versus an illegal game of chance. The top scorers who are tied will get a chance to match wits with additional tie-breaker questions until a winner is left.

The contest ends June 30, or whenever a maximum of 12,500 entries are received, whichever comes first. If the minimum 7,500 entries is not received by June 30, the home will not be awarded. If the house is not given, the contest winner will be awarded three-fourths of all contest monies received, with the balance going to Roth and Reiner to defray the cost of creating and marketing the contest. Contestants can opt out of this so-called “collateral” drawing and get their money back--provided they ask to do so in writing prior to June 30.

All this assumes, of course, that Roth and Reiner will get the minimum 7,500 entries--which would generate $562,500--needed before the couple give their home away. With only two months left before the contest is set to conclude, Roth reported that he has had only about 1,500 inquiries and an undisclosed number of actual paid entries.

He is optimistic, however, maintaining that an upcoming radio advertising and public relations blitz will attract plenty of contestants. There’s even a toll-free number to call: (800) WIN HOUSE. Meanwhile, Roth said, he has cut a deal with a buyer of radio ads to pay no money now for the ads, only a share of the contest haul. Roth has also been running his own ads in newspapers.

But the home contest raises a number of legal and other questions. While the contest materials mention that the Roth home was appraised in December for $535,000, the materials don’t mention that the home was listed for sale last year with Fred Sands Realtors in Studio City in the mid-$400,000 range. Even at that price, there were no buyers, Sands listing agent Geneal Arnoult recalled.

And the state attorney general’s office has its own set of concerns about home contests. In California, games of skill are allowed by law, but games of chance are illegal.

In some other states, real estate “contests” are legal and a few have worked. One resident in Maine, who owned a bed-and-breakfast inn but wanted to get out of the business, set up an essay contest with a $100 entry fee. The Maine innkeeper pocketed $500,000 and picked the winning essay submitted by a couple who wanted to live in rural Maine and run their own business.

But in California, real estate “contests” are more of a gray area.

In March, the attorney general charged a San Francisco company with unfair business practices and deceptive advertising in connection with two home giveaway contests in the Los Angeles area. The complaints were filed in Los Angeles Superior Court, along with settlement agreement in which CPM Property Marketing Inc. is forbidden from offering any essay contest or lottery to dispose of real estate, said Jerry Smilowitz, deputy attorney general in Los Angeles. The company had been offering a lottery contest for a home in Beverly Hills and an essay contest for another home in Cheviot Hills. The contests have been canceled and the money returned.

Roth was informed in November that the attorney general would not pursue him as long as “he is willing to offer entrants a right to have all monies returned in the event that the house is withdrawn as the prize.” Even with the stipulation, Smilowitz said, “we’re not thrilled about this. It’s a speculative venture and people who want to get involved in it should do so with caution.”

There have been very few successful contests around the country, Smilowitz said. And, he added, he doesn’t know of one that has been successful in California.

The downside of home giveaways isn’t enough to deter some homeowners who see a contest as the best way to unload their home.

“We feel a contest is better than putting our home up for sale and having nothing happen. I’m willing to take the gamble,” said Sybil Casey, who owns a three-bedroom home in North Hills. “We’ve decided against putting it up for sale, especially with all the other homes on the market.”

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Three years ago, Casey bought the home for $200,000. The only other home that recently sold in her small gated community recently went for $139,000. Casey hopes to sell 4,000 contest tickets for $100 each; if she does, she would gross $400,000 and turn a tidy profit on her home. She wants to relieve herself of the burden of homeownership and eventually move to the Caribbean.

Haig Nashalian and his family are also considering a contest as an alternative to selling their three-bedroom home in Reseda. “The market is very soft and we thought a contest would be a very good way to get rid of the house,” he said. He estimates that the house is worth about $150,000--which is also about the amount of money he owes on it. With a contest, he said, there is a possibility of still making a profit. “We’re thinking about it and we’re asking about how we can go ahead with it,” he said.

Danielle Prange, who recently tried and failed to sell her North Hollywood home through a contest, advises would-be contest organizers to “try another option.” Prange and her husband, Roy, organized an essay contest as an alternative to selling their four-bedroom residence on one acre near Coldwater Canyon Avenue and Roscoe Boulevard.

Contestants were asked to send in $100 and an essay about why they want to live in North Hollywood. One of the letters in response came from the state attorney general, however. The AG said the contest was an illegal lottery because it was akin to a game of chance.

The Pranges got just 200 inquiries, but only two entry essays. “People were afraid we were going to take their money and run,” she said. Another problem, she said, was when some TV stations covered their contest, “it became a circus.” The contest was canceled and the two essay writers got their money back.

The house is now for sale by owner for $300,000, down from the original asking price of about $450,000. Even with the big price cut, Danielle Prange is uncertain about the prospects for a fast sale. One recent offer was for just $170,000, she said.

“We really want to get out of the house,” she said. “But I can’t sell it and I can’t even give it away.”