5 Ways To Pay Less for Your Dream House

kali9 / Getty Images
kali9 / Getty Images

After months of searching Zillow, driving through neighborhoods, and attending open houses, you finally spot it. It’s the house of your dreams. But the asking price is more than you’ve budgeted for when you factor in principal, interest, and property taxes. Do you wait it out, hoping the price will drop, choose another property, or try to negotiate?

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Real estate prices don’t seem to be dropping any time soon, according to the latest data from experts. Likewise, mortgage interest rates aren’t expected to drop until the end of the year. This makes it a challenging market for buyers, especially when homes are moving off the market quickly.

Fortunately, there are a few ways to make your bid stand out to catch the seller’s attention, negotiate a lower price, or even find your dream home for less than market value.

1. Use House Hacking To Afford a Larger Mortgage

One way younger generations are coping with the housing crisis is through a tactic called house-hacking, or renting out part of the home you live in.

Typically, it’s renting out bedrooms to tenants who live in your home, and “the rent helps you make mortgage payments, build equity faster, and even save some extra money,” Ryan Barone, CEO of RentRedi, explained.

He added that a lot of RentRedi customers started using the all-in-one property management software when they became accidental landlords. “Some of them do it in order to afford a mortgage that they otherwise couldn’t qualify for or would struggle to make payments on,” he said.

RentRedi customer Malika McCalla shared her story with GOBankingRates via email:

“I purchased my first door for $155,000 after college using savings from my job in marketing. It was a two-bedroom/one-bath property, and I rented a room to a graduate student while I also lived there. I was able to use the savings from house hacking to pay my mortgage and build equity, which allowed me to eventually sell it for $240,000 and then reinvest my profits in multifamily properties, scaling to five doors.”

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2. Be Willing To Put in Some Work

If you’re intending to rent a portion of your home, keep in mind that a multi-family property may cost more than a single-family home. But you can save money on any size property by considering a fixer-upper, suggested Todd Stearn, founder at The Money Manual. You might even find a home very similar to your dream house, in a similar neighborhood, but showing some signs of wear.

“Being willing and able to put in some work on your new home can get you a great deal,” he said. “The home could need a full overhaul, but it doesn’t have to be a disaster.”

Ideally, you’ll find a house with cosmetic damage but a solid structure. “Even if [the home is] in great shape but just very outdated as far as materials and colors go, that should be reflected in the price,” Stearn said.

Before you put in a bid, however, he advised that you should get not just an inspection, but also estimates from contractors for the work that needs to be done. “If any of the work will cost more than expected, you can try using that to negotiate a better deal on the home price,” he said.

3. Look for FSBO Properties Instead of Working through Realtors

Stearn also suggested shopping for properties that are for sale by owner (FSBO), to avoid the seller’s agent’s commission that’s often added to the home asking price. Also, homeowners may not have a good grasp on their home’s resale value — you could snag a great deal, or even find cause for negotiation.

“The owners may be less knowledgeable about pricing their property properly than a real estate agent would’ve been, and you may find in your research that it’s highly overpriced and be able to negotiate based on that,” Stearn explained.

4. Find Out What the Seller Really Wants (Besides Cash)

Most people selling their homes in today’s market want to secure a high selling price. But, sometimes, sellers have other priorities that take precedence over earning top dollar.

“It would be wise to speak directly with the seller to figure out what other concessions they’re looking for aside from the asking price,” said Gabe Andrews, founder at Cash Homebuyers Wisconsin. “Perhaps they want to sell their home within the next 15 days… Understanding the seller’s unique situation and motivations will help you tailor your negotiation tactics more effectively.”

5. Appeal to the Seller’s Emotions

Likewise, understand the emotions behind buying and selling a home. If you are putting in an offer for a property that’s in high demand, set yourself apart from the other bidders by writing a letter to the seller, Stearn suggested.

“This letter should explain what you love about the property and share a little about your family and how you envision enjoying the property for many years to come,” he said. “It may not make a difference, but many sellers feel torn about leaving a home they’ve lived in for a long time and maybe even raised their family in. Feeling like the property will be cherished could sway them toward you.”

A combination of these tactics could help you afford the home of your dreams, even in a tight real estate market.

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This article originally appeared on GOBankingRates.com: 5 Ways To Pay Less for Your Dream House