You’ve heard the horror stories – bidding wars with dozens of other home-shoppers – and seen the headlines where a buyer pays $100,000 or more over the asking price for a home. Yeah, it’s a crazy, super-competitive housing market.

A couple of quick home buying facts and figures in the Sacramento region just to increase your anxiety:

• Almost three of every four homes sold face bidding wars.
• Two of every three homes sold for more than the asking price.
• Homes are selling at a record-setting pace – six days in Sacramento County; five days in Placer County.
• Home prices are up 23% from a year ago to a record $625,000 in Placer County and $490,000 in Sacramento County.

But even amid all of the craziness and record prices, buying a home now and taking advantage of the near-record-low mortgage rates likely makes more financial sense than purchasing down the road when rates are higher, says Brandon Haefele, CEO and President of Catalyst Mortgage in Roseville. Plus, there are some tax advantages of owning a home compared to renting.

So, how can you compete and increase the chances of being the winner in a bidding war without going crazy?

ESTABLISH A PLAN

• Be honest with yourself and know how much house you can afford, based on your down payment – and know the total monthly cost of owning a home, including the mortgage, property taxes and homeowners’ insurance.
• Get pre-qualified (your creditworthiness) and pre-approved for a mortgage. Then you know your budget and how much house you can comfortably afford – or any potential trouble.
• Establish a list of must-haves – like four bedrooms – and the nice-to-haves but can live without or add later, such as wood floors or a fully landscaped backyard.

HOW TO MAKE YOUR OFFER STAND OUT – AND WHEN TO WALK AWAY

• Cash is often king, but only 15%-20% of homes are all-cash deals.
• So, for the rest of us, a bigger down payment – for example increasing from 20% to 40% — will attract more attention.
• Write a letter to the homeowners, listing the things you love about their house (everyone likes compliments and a connection).
• If possible, reduce the time frame on the inspection, appraisal and loans. Be flexible on the closing date (the homeowners may be buying another home as well).
• When you make an offer, don’t haggle over relatively minor repairs like a cracked window or chipped tile. However, DO NOT ignore major repairs, like a broken air conditioner or roof damage.
• Perhaps the most important advice from real estate experts – don’t become too emotional about a house and overpay. If you spend too much, even with near-record-low mortgage rates, the house of your dreams will eventually become a financial nightmare.

Congratulations. You had the winning bid and can move into the home. A few things to keep in mind about owning a home but are often forgotten, and to take into consideration when budgeting.

TRUE COST OF HOMEOWNERSHIP 

• If you buy a home in a neighborhood with a homeowners’ association (HOA), consider the monthly cost.
• Ask any homeowner, and they will say things happen – and never at a good time. A broken garbage disposal, a leaky water heater or a garage door that comes off the track and bends like a soda can. A good rule of thumb is to set aside about $1 to $2 per square foot – or about $170 per month for a 2,000 square-foot home. Of course, costs depend on the age and condition of the house.
• If you have ambitious plans to buy and then do some home-improvement projects, remember the cost will likely be much more than you planned – and likely take more time than you want. For example, replacing an entry door can cost $2,000, while replacing windows can top $22,000, according to Remodeling magazine’s West Coast report.