First-time home seller, here. I’m planning on selling my house in the next couple months. We’re going to use the profits from the sales to pay off debt and make a down payment on our next house. Do the profits from house #1 go directly into my bank account at the conclusion of the sale so that I can choose how to use them myself, or do they go into some kind of escrow account where the bank holds the money? I just want to know so that I can plan accordingly for debt payments and moving expenses, and such. Thanks in advance.
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The price paid for the house will be deducted with the remaining mortgage and other bank fees and then the remaining will be deposited to your bank account.
Typically the buyer will put the funds in escrow while the sale is closing. Once the closing process is complete, the escrow agent will send your mortgage company their share and deposit the remainder in whatever account you specify.
This process is usually pretty quick – a day or two once the closing is complete.
Part of this will depend on what jurisdiction you are in, but the escrow company or lawyer that is closing the deal will write a check to you or wire the remaining funds to an account you provide *after* paying off all liens on the house – outstanding mortgages, property taxes, unpaid HOA assessments, etc.
Be aware of capital gains, how primary residence, and homeowners exemptions work if you choose to not reinvest all of the capital in a new house.
In short – you greatly reduce your tax liability reinvesting the profits into a new primary residence. See: [this explanation.](https://www.rocketmortgage.com/learn/can-you-avoid-capital-gains-tax-by-buying-another-house)
Man, a lot of odd info here and confusing use of terminology by you and others that could really lead you down the wrong road.
First, let’s differentiate between profit and proceeds. The proceeds will be what you receive at closing. The sale price of the house less closing costs and mortgage payoff. This will be deposited into your bank account. It’s yours to use however you want. Your PROFIT is essentially the difference between purchase price plus improvements less sale price. Depending on those variables you may or may not have any profit.
Some people are straying into the question of taxes. Assuming this is your primary residence and you’ve lived in it for 2 of the last 5 years then you are exempt from tax on your profit (known in this case as Capital Gain) up to a certain limit. If you’re single then $250k of gain/profit is excluded from taxation. If you’re married, the exclusion is $500k.
There is no longer any incentive to roll the profit into a new property. That only applies to investment properties and is a whole other conversation.
Asking just because I’m curious. How much profit are you making to actually offset paying as much as you will in interest?
The profits you make aren’t really “profits.” They are, but its not like selling shares of a stock where its just pure profit. What happens is that if you sell your house for a greater value than you bought it for, then that “profit” becomes the new down payment for the new house. So if you bought your first house for $200k and sold it for $300k, the bank will subtract the $200k you owed them from the new $300k sales price of the house and you will be given $100k in cash which you can put towards a down payment. The remaining $200k would be new mortgage that you will owe. Sometimes you are given a check for the $100k, sometimes it is put directly into the account of the title company that is handling the sale of selling your house, they subtract the amount you owed the bank and then give you the rest of the money. The key is yes you are given the money but its not really money you can keep but go towards your new down payment.
What do you mean up to a certain limit? I was under the impression you don’t pay any CGT on a PPOR if you have never rented it out.
When I sold my last house I was given a check for $70,000. It was about 5:30, so the banks were closed. I literally ran it through a deposited capable ATM. I was fully expecting problems, but other than the standard holds, it went right through.
In general, yes, after you pay off your house (to the lender) with the proceeds of the sale the leftover money (after paying the ~~leeches~~ real estate agents) goes right into your bank account for you to do with as you please. Escrow is a different thing, you need that for your next real estate transaction but after the sale is said and done that money is yours. You could stuff it in your mattress, or buy a bunch of gold, or put it all in coins in a silo and jump into it like McDuck.
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