it is just like anything else you buy. The money goes to the owner that sell it to you. The owner might be the company/person that build it, it might be a person that bought it from someone else and lived in it.

The previous owner might have borrowed some of the money to buy the house from a bank, if so that loan has to be paid back with some of the money.

The real estate company, is just company is just a company that takes some picture of the house and advertise to find someone that wants to buy the house and does some of the paper work, they get paid for that service

To the seller.

If the seller is a developer, then it goes to the developer (who might be the construction company). The developer pays for the construction and land.

If the seller is an individual owner, it goes to them instead. They may have to use some of it to repay outstanding mortgage etc.

In that sense, buying a home is not fundamentally different from buying something from a store. Buyer pays seller.

If you buy it from the secondary market then it goes partly to the owners equity, mostly to the bank, some to the real estate agent.

If you buy from a company that builds homes directly then all to them i suppose

To the person who owned it and sold it to you. And then they use part of that to pay off the rest of their mortgage

When you purchase a house the money you pay goes to the previous owners. I would think that would be pretty obvious.

A newly built house is often built on land which is owned by some kind of developer who paid the construction company to build said house. Your purchase of the lot and house would be the return on the investment of the developer, who makes back the cost of the house and land plus presumably some amount of profit.

In the process of purchasing the house you will often pay a real estate agent or agency to provide various services related to completing the transaction. This percentage is usually split 50-50 between the agent for the buyer and the seller, but the percentage of the overall cut varies.

The bank is usually providing a loan in the form of a mortgage to make this all happen, so it is the bank's money being distributed and then the buyer will be paying the bank back over a longer period of time. The bank collects significant amounts of interest on this long term loan but again the percentages vary.

If you buy a candybar from someone, you give them money and they give you a candybar.

If you buy a house from someone, you give them money and they give you a house.

• If they still owe money on their mortgage, then they use your money to pay it off. If they have money left over then they made a profit. Hooray for them!
• If you took out a mortgage to afford the house, then you now owe the bank a whole lot of money. The house itself is the guarantee that you will pay them back: if you don't, they take the house.
• When you sell the house, the buyer will give you money. If you still owe money on your mortgage, then you will pay the bank. If you have money left, you have made a profit. Hooray for you!

It sounds like you're asking about buying fresh new houses, so I'll give a bit of details about those.

The long and short of it is that your money goes to the one of two things: If it's part of some whole new neighborhood that just opened, some promoter paid a whole bunch of construction companies to build 300 houses and a bunch of other buildings up front, and you're paying them. If it's just a house torn down and rebuilt, you're paying a single construction company that paid for the old house and lot, then paid to demolish and rebuild it, all in advance. Then they make profit once the house is sold.

Howe much everyone involved costs has no real answer because every project and business has their own guidelines.

Generally speaking, the ones paying a couple dozen million for a whole new development up front will expect to make more profit than the workers who did the job. This is compunded by them doing a whole neighborhood, so they have little to no competition, they know everything will sell, and they'll be the ones selling.

The moment there's more promoters, everyone's profit margin will get smaller, but not that much because they'll often collude and get away with it. workers won't get paid a dime more.

In truth, the small nd medium construction companies often go bankrupt because of how many unforeseen problems can baloon up costs after they got locked in to a fixed sale price, or because of their obligation to repair building flaws. So, since they take all the risk, and the workers merely show up, do their job, get a guaranteed paycheck, and find a new job if the company sinks, they don't get as big a piece of the pie as the promoter or construction company.

Where does money go when you buy anything? To the seller. They can use that money to pay whoever they need to (like the wages of construction workers) just like any business.

It's just a matter of spending the money before you have it. If someone wants to sell a home, they can take out a loan, buy land, materials, pay workers to build one and it's a gamble that they can sell the home for more than the value of the loan plus interest.

The buyer takes out their own loan (mortgage) to buy the home, the seller gets that money and uses it to pay off their own mortgage.

Businesses often operate in a state of constant debt (not with a deficit) constantly taking out loans to spend money to earn money that they use to pay off the loans. They end up with more money than they started with, and they can use that new money to justify larger loans or to start new projects, and they just grow from there.

Buying a home with a mortgage is really no different from buying groceries with a credit card. You use the credit card, the bank pays the business on the condition that you pay the bank back later. Using credit rather than cash or debit means there's more money free to circulate around the economy as long as you're responsible and don't spend more than you earn.

Are you talking about a new home or pre-existing home?

For a pre-existing home, the purchase price goes to the seller and their mortgage lender. Let’s say the sale is for $400k and they still owe $150k on their mortgage. The seller would receive $250k and their mortgage holder would get the remaining $150k owed to them.

For a new home, the money would go to the developer/builder. They would then pay the construction workers they hired to build the house, pay the loans they used to fund the construction and land purchase, etc.

Typically, a home sale has 5-6% sales commissions paid by the seller. That amount is split between the buyer’s agent and seller’s agent, who them pay a chunk to their brokerage (Keller Williams, Century 21, etc)

Your submission has been removed for the following reason(s):

ELI5 is not for information about a specific narrow issue (personal problems, private experiences, legal questions, medical inquiries, how-to, relationship advice, etc.)

If you would like this removal reviewed, please read the detailed rules first. If you believe this was removed erroneously, please use this form and we will review your submission.