When he agreed last summer to raffle off a $1 million house -- complete with library and goldfish pond -- to raise money for a women's war memorial, Alexandria builder Scott Herrick hoped the unique offering would bring attention to the charitable venture and help him recoup some of his construction costs.
But with the deadline for ticket purchases two weeks away and sales frustratingly low, Herrick, president of Landmark Communities, stands to take a big loss on the gamble.
After postponing a scheduled November raffle because of poor ticket sales, the Women in Service for America Memorial Foundation will raffle the home at Centreville's Virginia Run on Feb. 23 to raise money for the $25 million war memorial. The deadline for ticket sales is Feb. 14. Sponsors of the event said the raffle will be held as scheduled.
While it originally hoped to sell 250,000 tickets at $25 each, barely 30,000 have been sold to date. Foundation president and retired Air Force Brig. Gen. Wilma L. Vaught said another 40,000 tickets must sell "to make this thing a winner" for the foundation. For Landmark, however, a big loss appears likely.
"It's unfortunate" that Landmark's loss will possibly in the hundreds of thousands of dollars, Herrick said. "But our position entering into this project was never to make a sale," he said. "We welcomed the opportunity to boost the visibility of the foundation and the memorial.
"If anything," he said, "we're more positive today about the raffle than we were initially."
The 6,000-square-foot home was built in 1988 as one of 15 model entries in the showcase Festival of Homes contest at Virginia Run sponsored by the Northern Virginia Building Industry Association. Originally offered for sale in early 1990 at $1 million, the house features a master bedroom suite with whirlpool, brick courtyard, two-car circular drive-through garage, cedar deck with hot tub and two gas fireplaces.
What it has lacked, though, is a buyer.
The house lingered on the market because of a steep downturn in luxury home sales and the fact that the typical asking price in Virginia Run, eventually to include 1,500 homes, is about $300,000.
When a foundation volunteer and real estate agent suggested the raffle last winter, Landmark was contacted and arrangements made. Landmark deeded the house to the foundation in June. In return, the builder was to receive a portion of ticket sales sufficient to match a prearranged sale price.
Neither Landmark nor the foundation would disclose the exact price, but Vaught describes it at less than $1 million and more than $750,000. Revenue from tickets is about $750,000.
At first, the arrangement seemed like a sure thing.
"We thought, 'You can't lose,' " said Vaught. An unrelated charity raffle for a $260,000 home several years ago in Northern Virginia had sold 250,000 tickets at $10 each, Vaught said. Here was a $1 million house for a $25 ticket.
Since then, efforts to promote the event have been thwarted at virtually every turn. "We seem to be running right down the Murphy's Law list," Herrick said.
For starters, through a classic case of bad timing, the foundation's first press conference, critical to early ticket sales needed to finance advertising, occurred on the day last June when videotape was released to the press of former D.C. Mayor Marion Barry allegedly smoking crack cocaine in the Vista Hotel.
"Not a single television station showed up," Vaught said. "And it was three weeks before we could get a story in The Post. Now it's been announced we're in a recession and there's a war going on."
The event was registered as a raffle, to which certain restrictions apply. Participants can't buy tickets by mail and when efforts to establish a point-of-sale network failed, sales slumped.
Complicating matters, Maryland state law prohibits advertising for a raffle that takes place outside the state. As a result, The Post has declined to run foundation ads in its general circulation sections, limiting exposure to the Weekly District of Columbia and Northern Virginia sections. Tickets are being sold at the raffle house at 6301 Barnesdale Path and at selected area real estate offices.
Another hindrance, Vaught thinks, is fear on the part of potential ticket buyers of a tax bill on a $1 million house that everyone knows is worth far less in today's market. "People probably say, 'I won't even be able to sell it,' " she said.
An Internal Revenue Service spokesman, however, said income taxes would be based on the home's fair market value -- in this case the appraised value. The winner, the spokesman said, would be wise to have the house appraised and submit the appraisal with his or her federal income tax return.
Assuming for argument's sake a value of $800,000 taxed in the highest income bracket (31 percent, or taxable income above $82,150 for a married couple in 1991) the federal tax bill on the raffle prize would be $248,000. Fairfax County real estate taxes, using the same appraisal price, would total $8,880 annually.
Advertising costs for the raffle have been proved to be significantly higher than the $150,000 the foundation originally estimated. Landmark, which is to be paid from ticket sales in two installments, gave half its first installment back to the foundation to cover advertising expenses, said Bernadette Manara, director of marketing for Landmark. How much, if anything, the builder gets from its second installment hinges on last-minute ticket sales, Vaught said.
"At this point we'll be lucky to break even," said Vaught, adding she has abandoned hope of even approaching the goal of a $250,000 profit from the raffle for the memorial.
The raffle proceeds represent only a small portion of the $15 million needed for the women's war memorial, which will encompass Arlington Cemetery's main gate and will include a computerized registry of women in the military, including highlights of their service record.
To date, the foundation has raised $3 million. Congressional authorization for the project expires in November, and Vaught said reauthorization will be necessary to complete the memorial. No federal money will be used.
While the foundation hopes at least to break even on the raffle, Landmark will not be as fortunate.
The house cost Landmark more than $1 million to build in the euphoric 1988 market, Manara said. By sharply discounting the sale price to the foundation, Landmark already was agreeing to a significant loss on the house even if ticket sales went as planned.
Now losses will likely run in the hundreds of thousands of dollars. For Landmark, a relatively small player in the region's luxury home market, the loss is significant.
"This is not something that's going to weaken our position monetarily," Herrick said. Although the builder's loss likely will be far greater than expected, he said, "we anticipated a loss entering the project."