How to Get Out of a Bad Deal
Got a case of buyer’s remorse? You may not be stuck with that purchase
We've all made the mistake of signing on the dotted line and getting into a bad deal.
Perhaps a salesperson talked you into buying something you weren't really comfortable owning. Or maybe you took out a home-equity loan and later had second thoughts.
No matter the situation, the end result is the same: You have a bad case of buyer's remorse and wonder what, if anything, can be done.
Fortunately, there are many ways to unwind a transaction you've come to regret. Here's how to get out of a bad deal on four common purchases and borrowings.
Most of the time when you buy a car, you're either financing or leasing. If you finance your car and change your mind after signing a contract, you're still stuck with it unless the car has mechanical problems. In that case, you might have recourse via your state's lemon laws.
With a leased vehicle, though, you have far more options — even if you simply changed your mind.
Scot Hall, executive vice president of operations at Swapalease.com, estimates that at least 50 percent of people who lease cars experience buyer's remorse at some point during the contract.
"People might not be happy with the deal for any number of reasons," Hall says. "Financial difficulties may arise or there may be a change in family circumstances."
For older Americans, Hall says it's not uncommon for them to experience a kind of "empty nester syndrome in reverse."
"Someone with a minivan might have their last kid who just graduated from college, and now they want a two-seater," Hall notes.
Swapalease.com helps facilitate lease transfers online by matching people who want to get out of their auto leases with others who are looking to get into lease agreements. Hall says that in most cases the lease can be transferred immediately, whether you're one week, one month or even one year into the lease. All the negotiating — including how to pick up or drop off a car and whether any money needs to change hands — is done between you and the other party. Swapalease.com simply acts as a kind of middleman, handling the paperwork and helping you make sure you're following the leasing company's guidelines.
According to Hall, nearly every major carmaker — including General Motors, which offers such brands as Buick, Cadillac, Chevrolet and GMC; luxury brands such as BMW and Mercedes; and others — has fully assumable, transferable leases.
"So the person who had the lease walks away clear and free," Hall says.
Did you refinance your mortgage or tap into your home equity but now you wish you hadn't? You can unwind the deal under certain circumstances — but you'll have to act fast.
Under the Truth in Lending Act, existing homeowners (not home buyers) have the "right of rescission," which means they can change their mind for any reason if they don't want to stick with a refinanced mortgage or a home-equity loan they've already signed.
The key to exercising this right, though, is to do it within the legally prescribed time — and that's a tight window. You have three days after you sign a mortgage contract to exercise your right of rescission, according to Ira Rheingold, executive director of the National Association of Consumer Advocates.
Your rescission period starts at midnight on the day after you sign loan documents. The period ends three business days later, including Saturdays but not Sundays or holidays. Once midnight strikes on the third business day, the rescission period is over, and any loan documents you've signed become legally enforceable. For example, if you sign a loan at 3 p.m. on Tuesday, then the rescission period begins nine hours later, at midnight. It runs for Wednesday, Thursday and Friday. The loan would take effect on Saturday.
But if your bank never notified you of your rescission rights, or you can show that there was a material misstatement in your loan documents, then your rescission rights are extended to three years.
To issue a rescission notice to the lender, you have to do it in writing. A phone call or in-person visit isn't enough.
Also, rescission rights are granted only for your primary house; you don't have them for a second home or an investment property. Last, your rescission rights apply only with a lender other than your current lender.
Why would you want to rescind a loan agreement? Maybe you've decided you can't afford the payments or could get a better deal. Or perhaps you decided it's just not a good idea to tap the equity in your home after all.
Whatever the reason, if you legally rescind a mortgage deal, you should not suffer any financial penalties.
Time-share properties also include a right of rescission — and for good reason. In many cases people buy time-shares after high-pressure sales presentations. Even if you bought because you were basking in the glow of a vacation, you still have the right to change your mind. That's why a rescission period is often called a "cooling off" period.
State law varies, with rescission periods ranging from three to 21 days. This gives you time to have an attorney, trusted family member or friend check over your time-share purchase so you can be comfortable that you got a good deal and that the contract is as promised.
Your retail purchases
Even with smaller retail purchases, such as clothing or jewelry, you can often get a refund, credit or exchange after a change of heart. Just make sure you know the store's refund policy before you buy. And always keep your receipts.
Ultimately, your best protection against buyer's remorse is to buy only what you really want, when you're truly ready — and to know the terms of the deal before signing on the dotted line. If you feel as if you need a voice of reason when you're at the mall, bring a shopping buddy with you to keep you on budget.
Lynnette Khalfani-Cox, The Money Coach(R), is a personal finance expert, television and radio personality, and regular contributor to AARP. You can follow her on Twitter and on Facebook.
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