Watch CBSN Live

How to find 'hidden gems' in real estate

(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.

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.

How to find 'hidden gems' in real estate


Glen Ellyn, Ill., is a choice neighborhood in the western suburbs of Chicago. But its neighbor Wheaton is just as lovely. In Glen Ellyn, a four-bedroom, four-bathroom house close to downtown can run you upward of $600,000. This home retails for $649,000 and is near Lake Ellyn Park and Main Street.

How to find 'hidden gems' in real estate

But next door in Wheaton, an even larger house with a similar look, modern kitchen and bathrooms and an even shorter walk to the nearby Metra train costs just $450,000.

How to find 'hidden gems' in real estate


Seattle has the best of both worlds: urban appeal with a lush, natural landscape. Many people looking in the Emerald City may find luck in Normandy Park, where home prices average more than $400,000. This four-bedroom, three-bathroom Normandy Park home, close to the ocean, is on the market for $625,000.

How to find 'hidden gems' in real estate

But for almost half that price, pop over to Burien, Wash., where you can get a similar four- bedroom, two-bathroom home for $345,000, also just a short distance from the shoreline. Average home prices in Burien are only about $250,000.

How to find 'hidden gems' in real estate


As far as storied neighborhoods go, Cambridge, Mass., ranks quite high. Its appeal is reflected in its home prices. Homes in Cambridge go for millions, with the median sales price recently hitting more than half a million dollars. This 2,100-square foot, modern home in Cambridge has three bedrooms and four bathrooms. Newly renovated, it will cost you $869,000.

How to find 'hidden gems' in real estate

Meanwhile, on the other side of Davis Square, you get the same look and feel for much less. A similar home in Somerville, slightly smaller but with just as many bedrooms and bathrooms, will run you $629,000.

How to find 'hidden gems' in real estate

San Francisco

Life is expensive all around San Francisco's bay, particularly on the peninsula, where tech giants have brought in big money and quickly changed the housing landscape. If you want a home in famous Palo Alto, Caif., it will cost you: The median list price is more than $1.5 million. A 3,400-square-foot home with five bedrooms and five bathrooms lists at $4.1 million there.

How to find 'hidden gems' in real estate

Head north to San Mateo, Calif., which is close to San Francisco but much less expensive. Though the suburb doesn't have quite as much prestige, it still offers good schools, fun nightlife and easy access to trains into the city. For a similar, updated five-bedroom, five-bathroom home, you have to shell out only $1.4 million--and it comes with canyon views.

View CBS News In