Fraudulent Sales of Rugs

An image depicting a bazaar.

Everyday, dozens of people are virtually “robbed blind” at often fraudulent “Going-Out-Of-Business” sales and auctions that offer wildly inflated discounts off equally inflated prices. And when they go back to try to return the rugs, the operator refuses to accept them or has left town to run a “Going-Out-Of-Business” sales in the next county under a different name.

The truth, in many cases, is that the sale is being run by a professional Oriental rug ‘liquidators’- not the original store owner. To add more confusion to the mix a few established carpet stores run several “Going-Out-Of-Business” sales, in the same location begging the question; are they really going out of business? There are reputable rug merchants out there who do not employ these tactics. Luring clients under false pretense for them is not a way to run a successful business. Laws concerning these sales vary from province to province, but are generally hard to enforce, costly to litigate and carry very light sentences to offenders. We’ve prepared this blog to help you avoid the pitfalls of buying a rug at a fraudulent going-out-of-business sale, liquidation sale or end-of-lease sale.

Case #1

A diplomat lived for many years in the Middle-East and is knowledgeable about oriental rugs. He buys himself an authentic Persian Tabriz rug at a liquidation sale. Later, a certified evaluator identifies that the rug is actually a reproduction, made in China.

1a. Often, it’s an external operator that is organizing these sales. Don’t be duped even if the sale takes place in a well-known establishment. While these procedures are illegal in several provinces, the operator will have a huge number of rugs for sale, where the majority of the rugs will be of lower quality than what the company is usually known for.

Case #2

At a Liquidation Sale, Mr. and Mrs. Y spent $18,000 for three Persian rugs that they were told carried an original retail price of $49,500. The rugs were later valued by an independent appraiser at $7,850.

2a. Often, an outside operator will run the “sale”. Don’t be fooled if a sale takes place at a long established location. Although illegal in many states, the operator often will bring in large quantities of rugs, very few of which are the quality for which the established company was known.

2b. Their ads will frequently include vague and purposely misleading references to government agencies. Sales and auctions, particularly those staged at airports, often headline their ads with phrases such as “PUBLIC NOTICE – IRS GOOD”, “PUBLIC NOTICE – GOVERNMENT SEIZURE” or “GOVERNMENT BONDED WAREHOUSE”. This ploy is simply designed to give the illusion of legitimacy and legal status. The fact is that the Federal Government holds regional sales/auctions once or twice a year – not every Sunday.

2c. Or they’ll headline their ads with other, quasi-legal jargon. Although sometimes legitimate, the vast majority of advertisements using these slogans are an attempt by unscrupulous operators to lure you in. Typical headlines include:

  • Liquidating
  • Final Days/Last Days
  • Going-Out-Of-Business Sale
  • Insolvent Sale
  • Mortgage Sale
  • Bankruptcy Sale

Protect yourself

  1. Beware of high pressure sales pitches. Stores that advertise that they’re closing their doors tomorrow are often still open the next month. And when the salesperson tells you that the price is only good for today – be assured that he’ll still be willing to sell it at the same price tomorrow or next week.
  2. Don’t equate legitimacy with big dollar advertising. Make your purchases at a store with a solid reputation.
  3. Keep in mind that any guarantee is only as good as the store that offers it. A “Lifetime Guarantee” from a store that’s going out of business is worthless.

Case #3

At a “Going-Out-Of-Business” auction, Mr. A purchased a rug for $2,000 that he was told was worth $10,000. It was later appraised at $500.

3a. These sales are very profitable for the operator. They often succeed by intentionally and deliberately deceiving you, the consumer, with gross exaggeration about the real value, integrity, and (origin, quality of materials, weave, age and condition) of the rugs they sell.

Case #4

At an Oriental Rug “Going-Out-Of-Business” sale, Mrs. G. was sold an 8’ x 10’ “fine pure silk” Persian rug for $3,800. She was told it had a retail price of $8,000. She later took it to an independent appraiser and was told that it was rayon with an actual retail value of less than $1,500.

4a. Before beginning the “sale”, a dishonest operator might tag the rugs with prices that are hundreds (or even a thousand) percent more than their regular retail prices. For example: A rug that would normally sell for $2,000 is re-tagged for $8,000. The operator than advertises enormous discounts – typically over 60% or more. He’s claiming the rug to be worth $8,000 but is offering it to you, the unwitting consumer, for $3,200 – OR $1,200 MORE THAN YOU SHOULD ACTUALLY PAY FOR THE RUG.

Case #5

A couple purchased a rug for several thousand dollars at a liquidation sale. A month later the fringe started to fall off. Despite the ‘full refund policy’ promised at the time of purchase, they were offered only a token amount for repairs – far less than the repairs cost. The couple is now involved in a costly lawsuit to try to recoup their losses.

5a. If you have any question about the value of a rug you are considering purchasing, have an independent, certified appraiser evaluate it. If you need the name of a certified appraiser, contact your homeowner’s insurance agent. We also offer this service for you since 1976.

5b. And if you have already purchased a rug at a “Going-Out-Of-Business Sale” and have a problem, we suggest you contact your local attorney general for advice and assistance.

**Be careful: If it seems too good to be true it likely is!
**Don’t bury your head in the sand when it comes to buying Persian rugs!