Don't lose your head when you see "lost our lease" signs

The next time you're tempted by an oriental-rug store announcing in ads and banners that "Everything must go" because "We've lost our lease," hang on to your wallet and your sensibility.

"Probably 95 to 99 percent of all oriental-rug liquidations are scams," says James Ffrench, director of Beauvais Carpets in New York and a rug appraiser on TV's "Antiques Roadshow."

"I often see the same merchandise, supplied by the same importer, with the same sales staff, all around the country."

And it's not just oriental-rug stores; you should be cautious at liquidation sales for electronics, jewelry and furniture. Those promises of deep discounts could signal overpriced and inferior merchandise, no warranty and no way to get your money back if, say, that new timepiece turns out to be more cuckoo than clock.

These days, going out of business is itself big business. Stores hire liquidation experts to manage every aspect of the sale, including setting prices, running ads and bringing in salespeople. They may augment existing stock with inferior merchandise or with leftovers from previous liquidation sales.

Consumer Reports came across some shady dealings earlier this year during a liquidation sale at the Hitchcock Chair Co., a 180-year-old manufacturer of handcrafted furniture in Connecticut. Signs in store windows proclaimed "Closing our doors forever" and "Don't miss out." Inside, merchandise tags had fine print saying that items were "as is" and might never have been sold at the original prices shown.

CR saw a Viewpoint Madison leather chair and ottoman marked down $300 from $2,989. After some haggling, a salesperson offered it to CR for $1,950 plus a 6 percent delivery charge. Later, CR researchers found the same item online at CSN Sofas for $1,864 — with free shipping. The online product was new; the one in the store was a floor model. A matching couch that the salesperson offered at $1,797 cost $1,419 online.

Still, there were bargains to be had at the Hitchcock sale, which was managed by Planned Furniture Promotions, a Connecticut liquidator. (In 2001, PFP paid $255,000 to settle claims brought by the Massachusetts attorney general charging the company with creating fake original prices and phony markdowns on more than $800,000 in new merchandise illegally trucked in during a sale.) One Hitchcock customer negotiated a price on a grandfather clock that CR couldn't beat online or at a local store.

Before you surrender to the lure of the liquidation sale, check with the local Better Business Bureau or state attorney general's office to make sure that the company going out of business is on the up-and-up. And remember to haggle: The salespeople need to sell the inventory. Don't settle for the first price.

Other tips for smart shopping:

• Write down model numbers and check prices with competitors online and in the area. Include shipping, delivery and setup charges.

• Ask to see the product warranty to learn whether you'll be covered if something goes wrong.

• Pay with a credit card. You'll have more standing to get a refund than if you pay by cash, check or debit card.

2006, Consumers Union Inc.