(MoneyWatch) The watchword in the real estate world comes in triplicate: location, location, location.
That adage can really work against you as a home buyer, particularly in today's seller's market. Homes in the most desirable locations in any city are snapped up within days of going on the market -- and at increasingly high prices.
"We're already seeing multiple offers coming in," says Chicago-area ReMax agent Karen Lippoldt. "People are overbidding and putting in blind offers. That hasn't happened in years."
Sales are moving at a breakneck speed in many markets, where bidding wars and all-cash offers are quickly becoming the norm. On top of that, home prices are up 17 percent nationally, according to recently released data from real estate firm RedFin.
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Regular and first-time buyers that need conventional financing are starting to get squeezed out, forced to compromise on what they really want.
So how do you beat other buyers in such a frenzied market and find the home of your dreams? You change your location.
There's a lot of action in the market right now, so by shifting your search to an area of lesser activity, you can save a lot of time, hassle and, most importantly, money. You'll get the home you want at the price you want. On top of that, if you hit on an up-and-coming market, your home will be worth more when you sell it than if you buy in an established neighborhood.
To find these kinds of hidden gem homes, keep these three rules in mind:
Avoid areas with a lot of name recognition
Frequently, you will wind up paying more money for a house simply because of the reputation of its location.
Naples, Fla., for example, is well known as a ritzy enclave along Florida's Gulf Coast. You'll pay a lot more for a home there than you will just north in Bonita Springs, a community offering similar amenities, but homes there cost an average of $51 per square foot less, according to Coldwell Banker.
Identify your favorite places, then look for comparable areas
Almost every neighborhood or suburb is going to have a sister city of sorts that offers similar amenities, lifestyles and homes. Think about why you want to live in the places on you list among your favorites -- good schools, walkable neighborhood, great nightlife -- and use that to guide your search for comparable areas. You generally want to find a neighborhood or suburb that has a similar feel, but with a lower median list price.
Make sure you look next door
You don't have to choose between a suburb close to the city and one on its outer rings, or a neighborhood with train access to work downtown and one that has no public transportation options. There can be a huge price difference between two cities located right next to each other.
"Desirable towns tend to cluster together, because a lot of school districts cover several cities," Lippoldt says. "So even if you don't have kids, look for the good school system. The better the school district, the better the surrounding area will be."
Check out these sister cities, which offer similar homes for very different prices, and get an idea of how much you can save by sacrificing that specific zip code.