What REALLY Happens to HGTV Dream Home Winners?

To celebrate the 25th anniversary of HGTV’s Dream Home giveaway, the popular cable network is sparing no expense. Not only will the winner receive a sprawling 3,300-square-foot seaside house 10 minutes from Newport, Rhode Island, he or she will get a $250,000 mortgage and a brand new motor home.It sounds like the perfect prize, and millions of past entrants no doubt have thought the same. But, we're all adults here, so we know that if something sounds too good to be true it probably is.

As it turns out, it’s not unusual for winners of contests like this to be forced to sell the properties because they can’t afford the income taxes, property taxes or even the upkeep. Even winners of home make-overs must often sell.According to HGTV, only one of the first 10 Dream House winners has been able to hang on to their winnings. Just six of the first 21 winners actually lived in their new digs for more than a year.The longest “survivor,” the 1998 winner, kept her dream home in Florida for eight years before selling it. But after taking out a mortgage on the place to pay her taxes, according to Country Living magazine, she used it only as a vacation property.When it became obvious that most winners were unable to keep their prizes, many opted to take the cash option HGTV began offering. Others sold their prize homes, often back to their builders, and rarely at full value.

Taxes, mostly. Since the winnings are considered income, Uncle Sam wants his cut. And often, so does the state in which the property is located, as do other local jurisdictions which may have taxing authority.If you’re lucky enough to win an HGTV Dream Home, you’ll be responsible for federal income taxes on the value of the property or improvements, plus state income tax, depending on your state of residence. That means you’ll pay taxes at your marginal rate because the value of the prize is on top of any income you’ve earned from employment and investments.[caption id="attachment_326351" align="alignnone" width="966"]

Source: hgtv.com[/caption]Another problem: Most dream home prizes are located in areas with higher costs of living. Compound that even further with property taxes, homeowners’ insurance, utilities and maintenance costs are recurring charges. Oh, and let’s not forget that you may have to furnish the place.Most people can’t take the hit if they opt to keep the property, so they take the money and run. However, if you take the cash option, which in the example above is “just” $1.262 million, the feds would ding you for slightly less than $500,000. You’d also owe state income taxes, but there wouldn’t by any property taxes. Nice little windfall.[READ: Everything You Need to Know About Flipping Houses]

The 2007 winner actually ended up declaring bankruptcy, in part because he couldn’t afford the $2.5 million Texas mansion he won, though not for lack of effort. He listed the place for $5.5 million, but after it went into foreclosure it sold for $1.43 million – $1 million less than the local real estate community said it was worth.The 2008 winner would have had to pay sales tax of roughly $700,000 plus $20,000 more annually for property taxes, so she sold her new Florida Keys house for $1.65 million. But just 14 months later, her buyer listed it for sale $1.599 million. It took two more years to sell, and for only $899,000.The sales tax on the 2009 house was $500,000, and the property tax was $25,000. So three months after winning the Sonoma, California, manse, the winner sold it for $2.2 million. The buyer was the builder, who marked it up 10% and resold it. But there was a bright spot: the winner donated the contents of the home, valued at $187,000, to charity.The 2010 winner also took a big cut when she sold the New Mexico house she won. She listed it for $1.195 million, only to sell it for $899,000.The 2011 winners tried to use their new Vermont ski-in, ski-out lodge as a vacation home but only managed to use it five times before deciding to sell it, Tedesco reports. The place sold for $2.7 million, more than a million less than the $3.8 million HGTV said it was worth.The 2019 winner, Beverly Fulkerson of Osgood, Indiana, won a 3,650-square-foot Montana mountain retreat.Finally, last year’s HGTV Dream Home winner took home a 3,500-square-foot house valued at more than $2 million in Pittsburgh, Pennsylvania.There’s no word yet on how the last two winners are faring, but the moral of this story is still clear: unless winners of these types of giveaways plan to sell the places they already own and move, they probably can’t afford the hit. On the other hand, selling your winnings – or taking the cash instead – could result in a nice profit.After reading all of this hasn't deterred you from entering, that's ok – at least you know what to expect! Entrants have until 5 p.m. Feb. 17 to enter, and you can enter twice daily until the deadline at HGTV.com, where you will find all the details and the official rules.