Real Estate in High Gear

Ep. 01: Real Estate Success with a Mortgage Veteran - Art Shalomov

August 12, 2024 • Mike Paylian • Season 1 • Episode 1

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What if you could navigate the hottest real estate market in decades with confidence and precision? Join us on this episode of the Real Estate in High Gear podcast, where we chat with veteran mortgage lender and real estate investor Art Shalomov. Art shares his invaluable expertise on managing buyer demand and bidding wars in the frenzied real estate landscape of 2020 and 2021. Learn about the essential role of an experienced real estate team in overcoming challenges, dealing with appraisers' struggles, and handling buyer contingencies effectively.

Discover the ins and outs of securing mortgage options with Art's expert guidance on jumbo loans versus conforming loans, and why combining a first loan with a HELOC might be your best bet. Drawing from his own inspirational journey from immigrant to successful mortgage professional, Art emphasizes the transformative power of investing in real estate for financial security and legacy building. He also sheds light on the critical importance of mentorship and long-term planning in achieving homeownership and financial success.

Ready to build wealth through real estate? Art breaks down a proven strategy of purchasing multiple properties with low down payments, living in each for a year, and then renting them out. Understand the significance of maintaining financial reserves, enhancing your credit score, and preparing early for your home-buying journey. We wrap up this engaging episode with a nod to Art's passion for financial education, inviting listeners to explore more tips and strategies on his YouTube channel. Tune in and transform your approach to real estate investing today!

Mike Paylian:

Hey everyone, welcome to another episode of the Clutch Properties Real Estate and High Gear podcast. Today, we're happy to welcome Art Shalimoff into the studio. This guy is bad ass. He's a veteran mortgage lender, real estate investor and dad. And on top of it all, art has his own podcast called Get Money Smart, where the focus is building wealth, managing debt and saving money. Let's dive right in.

Art Shalomov:

Welcome, Art. Thanks guys. Thanks for the invite, Of course, man.

Gene Patent:

Good to have you here. So one of the crazy hot topics of 2020 and rolling into 2021 has been the red hot real estate market, which a lot of people didn't really expect. With the beginning of the pandemic, everyone was thinking that we're going to have another crash, but really the opposite kind of happened. The real estate market for residential has been on fire and with that, working with clients day in and day out, it's kind of like the Game of Thrones out there. You have buyers basically clawing at each other's throats going after the same house. You've got 15, 20 offers on one house. You've got challenges with things like appraisals, any other things that you can offer to these sellers to just get them to accept your offer. So have you seen that with your clients and maybe what are some crazy stories that you can share with us along those lines to kind of just get us warmed up?

Art Shalomov:

Oh yeah, every single day. I mean this is just a very hot topic. There's a lot going on. Obviously, the real estate market is on fire. Lots of buyers out there, not as many sellers, which makes it a seller's market, right. So obviously that creates lots of frenzy. I want to say Prices are increasing and obviously when property comes out, there's tons of buyers trying to get the same property. There's lots of stories I can share.

Art Shalomov:

I'm on the lending side, obviously. So for the most part, everybody's struggling, right. Everybody's trying to win that house and trying to find ways to win that. So, just to kind of give you a couple of ideas or a couple of things that I've been seeing around contracts getting accepted tough right. So how do you compete with that? So, number one I think it's super important to have the best real estate team right. Having an experienced realtor in this market is by far one of the most important things you can do. So a realtor having experience is super important. Number two is having an experienced lender that's available to help you, available on the weekends. Those are some of the things that you want to have a good team on your side, helping you kind of get through the process. And everybody's using strategies. As far as I don't know, I mean, there's lots of them. Is there anything in particular you want to know?

Gene Patent:

So I mean, I know one thing that has been tough in the current market is getting an offer accepted where the buyer is contingent.

Gene Patent:

Yep, so real quick, like what a buyer contingency is is just for those of us who aren't doing this every single day that are listening.

Gene Patent:

Basically, a lot of people, in order to qualify for a loan, they have to sell their current home. So in order to be able to buy the next home, they need to sell their current home. And when you go to make an offer on that new house, it says in the contract that, yes, I can qualify to purchase this home and get a loan on it, but I first need to sell my current home. I can qualify to purchase this home and get a loan on it, but I first need to sell my current home. So on my end, what I'm seeing is that a lot of times the sellers won't even look at those contingent offers because they have so many other offers that are not contingent, or maybe even people with cash coming from places like California where they just sold a $2 million check and they can now buy a million dollar palace in Scottsdale. So are there any strategies around those buyer contingencies that maybe you could recommend for somebody who does have a home to sell where they can buy one.

Art Shalomov:

So one of the things that we recommend if you have a home you've got to sell, see if you can find a gift from family. So your offer is not contingent upon the sale. So that's super important. Now, if that's out of the question, what I've seen some other agents do is this so there's one particular agent. What he does is basically he'll submit an offer and because we're also in a hot market, there's also benefits. So if you're selling a property, you're more likely to get your property sold to very quickly.

Art Shalomov:

So ultimately, what he's doing is submitting an offer and then, once it gets accepted, he submits, he puts their property on the market right away at a very aggressive price and just gets an offer accepted. So it's just the timing. You just got to make sure you time the closing correctly. But for the most part that's been really successful, just because, yeah, it's tough to find a property right now with a contingent offer, but it's also easy to sell. So it's been working. So we've got multiple transactions in that type of a scenario where it worked and we actually just closed one yesterday.

Art Shalomov:

So, just like in the same type of situation.

Gene Patent:

Okay, yeah, so basically the clients, his clients, don't have to worry about being homeless because they know like well, it might be tough, but as soon as we find that house, we can get our home listed pretty quickly and get it sold Exactly.

Gene Patent:

Yeah, that makes a lot of sense. I mean, the other thing too that I'm seeing and maybe we can switch gears and talk about this a little bit is appraisals. Yeah, so just due to the low inventory, you have people bidding up prices of houses to get them and with that sometimes these appraisers come in and some of them are keeping up with the time, so to speak, and they're like yeah, we understand that the market is crazy hot, we understand that comps are already stale information because they're a month old and they're pricing that aggressive market incline, but some appraisers aren't, and it's creating an issue when a home is under contract because it got bid up Right, but then the appraisal comes in low. So I mean, now appraisal waivers become relevant. Yeah, appraisal contingency waivers, and real quick. Does anybody want to explain what those are? What's an appraisal contingency waiver?

Art Shalomov:

Yeah, I can jump on that. So there's three contingencies in the contract, right? There's the inspection contingency, there's the appraisal contingency and there's also the loan contingency, right. So in order for the contract to stick, all those three contingencies have to be met. So, for example, if the property does not meet the inspections of requirements of the buyer, he can basically cancel the transaction, get his earnest money back. If the property does not meet the value that's agreed upon in the contract, the buyer can cancel. And also, if the buyer does not get a loan, right, it's contingent upon the financing of a loan. And if the buyer does not get a loan right, it's contingent upon the financing of a loan. And if the buyer does not get a loan, he basically can get his earnest money back and cancel. So those are the three things that protect the buyer. Now to go back to your contingency waiver and man.

Art Shalomov:

Appraisals are a sore subject for me, just because an appraisal, all it is is just an opinion of value, right? So I'll give you an example of what happened. So we had a property just closed last month. The listing price was 699,000. We order an appraisal. Appraisal comes in at 650, right, everybody's pissed right.

Art Shalomov:

Yeah. So what do you do? Right, you try to do a reconsideration of value, which is basically go back to the appraiser providing the comps. But the chances of that actually happening, I mean, it's not. I can't say it's impossible for it to happen, but the chances of the appraiser actually changing the value are probably slim to none. Like, a lot of times, you're just going to they're, it's just like, it is what it is. Very rarely do they change the value and yell at all $50,000, right, it's a big swing. So everybody's pissed. So what do you do? Like, what do you do in that situation? Right, the buyer's got to come up with additional funds to close, which obviously and it's not a lot, it's not two, three grand, it's 50,000, right.

Art Shalomov:

So what we did is this and this is something that not every company will allow you to do, but you can do it we ordered another appraisal, right. Guess what? The other appraisal came in at $720. Wow. So one came in below right, the other one came in at above asking price and that's why it's a sore subject for me, because I see that happen, I'm like it does not make any sense, like how do you do that right?

Art Shalomov:

So and this is kind of going back to having a good team this is so important, especially in today's market You've got to have a good team. So, for example, if you use a lender that's out-of-state lender or like an FDIC bank or a credit union, who's going to go and do that? Who's going to go and order another appraisal? Now, the difference between the first time and the second time is because the realtor she printed all the comps. They went and got all the offers and they said, hey, we've got 10 offers on this property and here are the additional comps. So this is again going back to having that team that's willing to work for you and going that extra mile to help their customer, right.

Mike Paylian:

Exactly.

Art Shalomov:

So it does make a difference when you meet the appraiser at the property and you tell them hey, mr Appraiser, yeah, this is listed at $699, but we've got 10 offers right, the market's hot, and here are the comps and here are all the upgrades, and they're all written out and broken down. You've got to go that extra mile. It's more important today than ever before. So you've got to have that team to help you with it. And this is not the only time that happened. I've had multiple times where the appraisal comes in light, we order a second appraisal and it comes in. So it's super important to have a good team on your team, good team members on your team, to help you with that. It's super important.

Gene Patent:

Yeah, and that's a really good point, and I think you hit on two things there that highlight how not all lenders are a dime a dozen, especially the good ones, and not all realtors are a dime a dozen, especially the good ones. Those are two things you highlighted, one done by the lender, in this case you, and one done by the agent. Whoever represented that person, who did something extra, went above and beyond to make sure that deal closed. You ordered a second appraisal. That agent was armed with a package that they handed to that appraiser to support their position.

Art Shalomov:

You've got to, and that's what makes you different. You know there's real estate. There's a lot of real estate agents out there, right, right.

Gene Patent:

It's not hard to become one. It's not hard to become one, it's hard to be a good one, right, right.

Art Shalomov:

So there's somebody told me the statistic the other day it's a real estate license is the second largest owned license after having a driver's license. Yeah, so it is important to have realtors that are willing to go an extra mile and do their job and look out for you. It is so important, especially in this market.

Mike Paylian:

Yeah, and let me ask you this, just because I'm going through something similar with a client of mine right now on a house that we're trying to sell. Okay, obviously, with the way that prices are, it's probably not going to appraise. So whenever an appraisal waiver comes across your desk, how does that look for you guys? What do you guys have to do differently in that scenario? Or does the buyer have to come up with cash? How does that look?

Art Shalomov:

On the appraisal waiver. So the appraisal waiver requires minimum of 20% down, and this is another thing which you can do is have your lender run. So here's what we did one time you can plug in the address and run the AUS, which is automated system, to see if you get a waiver at a higher. Let's say you're bidding above the asking price by $40,000. You plug that in and see if it gives you a waiver right. So if it does, then you're good to go. Hey, bid up the price, the appraisal is not required right so it just gives you an edge over the other offer.

Art Shalomov:

So, yeah, that can help. But in order for you to, you're not going to get an appraisal with 5% down, it's just not there. But if you're putting 20% down, the likelihood it's possible, but it's not going to happen every single time. Got it.

Gene Patent:

Okay, sounds good. Speaking of things getting bid up and prices going up, part of the other thing that's happening is your median price of homes has gone up drastically here in the past 18 months in the Phoenix Valley and a lot of homes are now above the bracket where a conforming loan will be enough to fund it for most people. So, real quick, I want to take a step back and just define what a conforming loan is. Art, can you handle that one?

Art Shalomov:

Yeah. So a conforming loan amount is they change that every single year. Right now, this year, for Maricopa County, it's $548,000. Forming loan amount is they change that every single year. For right now, for this year, for Maricopa County, it's $548,000. So anything over that is considered jumbo. That's what the limit is as far as it not being enough. Yeah, possible. There's still a lot of homes that are on their maybe not in the Scottsdale area, right on their, maybe not in Scottsdale area, but, yeah, if you go over that on the loan amount, on a single loan amount, then it's considered jumbo.

Art Shalomov:

Now, is there a benefit to go jumbo Depends on your financial situation, so you can get around it a couple of different ways. So if you go jumbo, the difference between conforming and jumbo really is just more restrictive lending right. So usually with jumbo financing, they want a lot more credit worthy borrowers, lower DTI debt to income ratio requirements, they want more reserves, so it just makes it a little more tougher because they want that savvy borrower right. So, yeah, it's going to limit to who can actually qualify. Now, to get around that is what you do is you basically have a first and a second, meaning you would have a first loan at 548,000, and then you would add a HELOC behind it, so it avoids because your single loan does not exceed the $548,000. Therefore, you're still conforming and you'll be underwritten according to the conforming guidelines, which it's fairly simple. But that's how you get around that, and both products have their own cons and pros. It just really depends on the situation.

Gene Patent:

Okay, but it is more difficult probably to qualify for a jumbo loan than it would be for a conventional with a second. Is that right?

Art Shalomov:

Yeah, it is a little tougher, for sure, yeah, it is tougher. Now the other part on this on the conventional side is the HELOCs, the second lender, because the other in second position, they have overlays as well. So sometimes they're a little tougher than the conventional financing. But overall it really depends on the scenario.

Gene Patent:

Yeah, okay, awesome. Well, I think we covered a lot of ground here today.

Gene Patent:

If anybody is still awake talking about this real interesting stuff here, but yeah, I mean, I live and breathe this stuff, so to me it's always exciting. The market's always changing. That's one of the things that I love about real estate, and I know you and I were talking earlier and you mentioned it's the same in the lending industry, so there's always something different that's going on, which is just another testament why you need a really powerful team behind you helping you through this stuff the people that are in it every day, that know what's changing, that understand it and that are able to take that and create the strategy that's going to get you the house that you want or get your house sold for the highest amount of money in the least amount of time.

Mike Paylian:

Yeah, man, and now that everyone sees you know that you know your stuff. I mean, tell us about you, man, like how did you get to where you're at and what was your process to? I know you're an investor yourself, so you face this stuff all the time. So how did you get to where you're?

Art Shalomov:

at Good question. So ultimately, I came to the United States at age of 10 from a former Soviet Union. When we came to the United States, my parents and I lived the five of us we lived in a one-bedroom apartment in New York City. And then one day my parents decided to come in New York city and then, um, one day my parents decided to come to Arizona to visit, and then they came in in February, you know, and then we ended up moving in in August. Um, fast, yeah, it was fast, and you know, my parents wanted a house. So I was 16 years old when we came to to Arizona and the realtor that was showing my parents' homes, um, I, I, just I always had the itch for real estate. I just kind of always was curious about it. I was 16 years old and then I was just curious.

Art Shalomov:

I saw my parents actually ended up buying a house two years later after we moved to Arizona. And then I went to college and then I didn't know what I wanted to do and the same realtor was a friend of the, became a friend of the family. He goes why don't you try to get into the mortgage business? I was like what you know? I'm like I don't know. I never tried. He goes I'm going to set you up with somebody.

Mike Paylian:

And you were 20 at the time. Right, I was 20. Yeah.

Art Shalomov:

So I got in people every single day Like I like numbers, Right, and it has to do with real estate, so maybe I'll do it. So you know, I'm 39 now, still in the mortgage business, right, and it became my calling. And then, with the same realtor, I bought my first house at the age of 24. That realtor is a real estate investor, so he kind of mentored me into real estate. So I never grew up in the family where investing was important. It was just not something familiar to my family. But what I learned was by being a loan officer I've always seen finances of other people that I did loans for. They always had real estate. Real estate was a common denominator. So I'm like okay, so I got to do something different for my family. I don't want to be in the same boat. Just kind of like.

Art Shalomov:

My parents never believed in investing, never had anything. And I always like to share a story about a customer that I had at the age of 64. He was a first-time homebuyer and when I asked him hey, you're 64 years old, you're a first-time homebuyer. He hey, you're 64 years old, you're a first-time homebuyer. He goes yeah, I'm like well, how come you never bought a house before he goes. You know, I always chased a low rent, like I just wanted my housing costs to be super cheap, and I never realized how quickly my life went by. He goes. I blinked and I'm 64. He goes. If I would have bought a home 30 years ago, I would have had a home. That's really clear today, because now I have four children, I want to be able to leave them something Right, right. So it just resonated with my family because my parents never really invested, they never had anything Right. But there's so many people just like that and real estate is the best savings account, if you will, yeah, right, because it forces you to save to make the payment you pay down the principal.

Art Shalomov:

So I just thought that real estate would be the best way to build wealth and it just became something that I just became obsessed with and kind of learning about it and it was just fun. For me it was never work and I think everybody should own a house. It's just because, no matter how you look at it, it is an asset that can be leveraged for a lot of things. You can, you know, do a cash out refinance, pay off your debt, you can do a cash out, refinance and, you know, pay for your daughter's wedding or your son's wedding. Whatever you've got, you can always do it At the end. When you get older, you can also get a reverse mortgage on it. So there's just so many different avenues where real estate can provide. It just became a no-brainer.

Art Shalomov:

And that's why I became obsessed with real estate and that's why I talk to people every single day. I'm like how come you don't have a house? You should totally do it. Like, why not If you can afford it? You don't have to buy anything expensive, as long as it's affordable. I talk to people every single day. They're worried about a market crash, right. But in all reality, like, if you can afford the payment, right, if the payment is affordable, the payment is $1,700, $1,500 a month. Like, who cares if the values go up or they go down? You know like everybody's values are up right now, right, I'm not selling. The only time it really matters is if you're selling, right. So real estate, you've got to hold on to long-term. It's a long-term thing, but it can be leveraged in so many different ways to help you.

Mike Paylian:

It's just a no-brainer. So and I'm glad you mentioned this stuff because I want to become a homeowner for the first time within the next year Now, for someone like me that doesn't own a house yet, that's always rented their entire life but understands that investing is kind of the goal right, it's the way out of the rat race, if you will. What tips would you give to someone like me who's just starting off and doesn't own their own house yet but does want to either own their own house and or own an investment property as well?

Art Shalomov:

So that's a very good question. It's a very commonly asked question. So the shift you've got to make is don't think about buying an investment property, just think about just buying a house. So if you just focus on, hey, I just want to buy a house and say if it's an investment because when you think of an investment you start thinking there's more things that you've got to think about Right, right, but you just got to buy one house first. So what happens is you buy the house, you live in it, you sell it, you take the equity, you roll it into another one. Okay.

Art Shalomov:

And you buy or you don't sell it. You just take that one. Actually, here's what you can do. If you want to buy multiple properties, you're single right. Yeah. Okay For now, except for now, right.

Gene Patent:

So here's what you can do Now, ladies single for now.

Mike Paylian:

I'll leave my phone number at the bottom.

Art Shalomov:

So buy one house with a 3% 5% down, live in it for a year, rent that one out, buy another one for a year. Rent that one out, buy another one.

Art Shalomov:

Okay, Move out, buy another one as a primary residence. Buy another one 3%, 5% down, whatever it is right. Yeah, and move out again and do that. So if I could do that, you just have to keep in mind that you have to make sure you save enough for the down payment and then make sure that you're moving up in square footage every single time. Oh, okay, why is that so? When most people younger people are aged, usually they buy up in square footage. So if you're a younger guy and you want to say, okay, well, I live in a 2,000 square foot house, I want to buy something for 1,000 square feet, they're like, okay, why is that? You're more likely to go up in square footage versus down. So it's just how lenders look at things.

Art Shalomov:

Got it If you're younger. Now, if you're 70 and you say, hey, I want to buy something smaller, it makes sense for somebody to downsize. But people our age usually would buy up. So if you buy something every single year, you can stack real estate. If I wanted to move every single year, my wife would kill me, but it's easier for someone to do that. But the key is you've got to have some reserves.

Art Shalomov:

You've got to have some reserves. It's super important. Money is super important. But owning a house, if you set a goal for it, just buy your first one. Forget about future. I want to buy five, ten properties. It's just too much to think at once. But just buy one.

Mike Paylian:

So what about in terms of debt to income at that point? Because you're saying between three to 5%, save up, live in there for a year, go buy your next one. Obviously, by the time you get number two, three and four, you've got a whole bunch of debt. So how does that look for a first-time buyer like me? I mean, that's something that I would be concerned about, right?

Art Shalomov:

So the property that you're vacating you're going to rent out. So the lender is going to get a rental comp with the market rent for that property and give you credit for 75% of that lease to offset that payment. Got it, do you follow? So they're going to say, okay, what is the market rent on that? Yes, I'm vacating a property.

Art Shalomov:

What's the market rent. They'll give you 75% of that credit. Got it? Yeah, you still have to qualify for a little bit more, but you're not going to. It's going to be. You're not. They're not going to hit you for the entire payment.

Mike Paylian:

Okay, got it. That's interesting, man. I might just go buy my first place right now. Man, I know a good realtor, cool man. Well, yeah, I mean, is there any last minute tips that you want to give our listeners when it comes to buying or anything like that?

Art Shalomov:

Yeah, so everything takes time. So if you want to buy a house in the next even 12 months, the worst thing you can do is just say okay, well, my lease is up in April 31st. Today's April 1st. Right, my lease is up April 31st and I want to April 30th. I don't think there's 31 days in April, it's one or the other.

Mike Paylian:

It's okay, we'll check so.

Art Shalomov:

I'm ready to go. So come to find out. First of all, in this market you never know when you're going to find the house or when you're going to have your offer accepted, I should say. So that could take time. Sometimes it takes two months. Sometimes you may get lucky, get it the first time around, but the likelihood of that happening is very small. So you got to start early. So, if there's anything, your lender, when they qualify, they take a look at your credit, your debt to income ratio, and they'll put a plan together for you, just to kind of prepare you for it. And what I found was, if you as a buyer understand the process, it makes the process that much simpler. So the biggest anxiety of buying a house is just the factor of the unknown. But if you get familiar with it, okay, ask what the lender. Just don't ask what's my rate. It's the worst question you can ask. I mean, it's important don't get me wrong but find out what the process is. Understand what the lender is looking for and why they're asking you these questions. Understand where your financial profile needs to be. It's just interesting.

Art Shalomov:

Sometimes I talk to a customer and they're like what's your rate? Because that's the only thing they know how to ask and their credit needs help. They're like dude you need credit help. There's so much more. And then he's concerned about the rate. So find out what the lender is looking for. Educate yourself. You're like dude you need credit help. There's so much more. And then he's concerned about the rate, right. So find out what the lender is looking for. Educate yourself how you could be a better borrower for the bank in the bank's eyes, right. And then, for example, I'll give you. Sometimes I pull somebody's credit.

Art Shalomov:

Actually I pulled somebody's credit the other day. 699 credit score the way the bank prices loans is every 20 points in increments of 20 points. So 660, 680, 700, 720, 740, and so forth. Right, so there's an adjustment, there's a bump to rate every 20 points. So if someone is a 699, okay, find out. Okay, how can I get to 700 or 720 so I can get a better deal, right? So that's the question is like how can I get to 700 or 720 so I can get a better deal, right? So that's the question is like how can I be a better borrower?

Mike Paylian:

Got it.

Art Shalomov:

How can I get a better deal? So start early and get prepared for the process. Educate yourself as far as what the lender is looking for. It'll make the process a lot simpler.

Mike Paylian:

Awesome man and I know listeners might be interested in reaching out to you and maybe asking questions or anything like that. What's the best way for them to get ahold of you?

Art Shalomov:

So you could. You could get ahold of me on Instagram. It's at Art Shalimov, and you can also call me directly at 602-492-5152 is my direct line to the office. I also have a podcast. It's called Get Money Smart. I talk about building wealth, managing debt and saving money. I love real estate, so you're going to hear a lot of that. If you visit my YouTube channel, you're going to find a lot of tips about credit, how to be a better borrower, why you should own real estate. So I breathe this stuff. So it's a lot of great stuff.

Mike Paylian:

Awesome, man. Well, again, thank you so much for all the insight that you provided today. We really appreciate it, man, and we look forward to seeing you again soon, man.

Art Shalomov:

Hey, thanks for having me, guys. This was a lot of fun.

Mike Paylian:

Thank you, man, Thank you everyone, for tuning into another episode of the Clutch Properties Real Estate in High Gear podcast. We'll be releasing a new episode on the first Wednesday of every month, so be sure to like, subscribe, share and look out for the next episode of Real Estate in High Gear.