About Brokers

The name "broker" invokes images of Wall Street and stocks. However, brokers are found in other industries, as well. Brokers are needed wherever there are items to be bought or sold. This guide explains what it is a broker does and why we need him outside of the stock market.

Function

When selling a large item like a home or business, an intangible such as stocks or copyrights, you will need the help of a person knowledgeable about both sides of the buying and selling equation. You will need a broker. Brokers are agents who buy or sell on their client's behalf. The broker never takes possession of the item being bought or sold, nor does he receive profits from the sale. Instead, the broker charges a commission that is paid for his services, a set percentage that is charged no matter how the transaction ends up.

Types

Brokers come in all types. Mortgage brokers help borrowers obtain a loan from a bank, while truck brokers find loads for drivers to haul and drivers to haul the loads for the factory. Food brokers acquire ingredients needed to fill store shelves or restaurant menus, while online brokers bring buyers to the goods sold and sellers to the buyers in need. Essentially a broker is required in any transaction that involves a buyer, seller and several choices for both to choose from.

Misconceptions

Although brokers mediate between the buyer and seller, they never take possession of the item being bought or sold and their commission is usually set before meeting the client. Some mortgage brokers never see the house that his client, the borrower, is trying to buy. Food brokers have no control over the use of the products after the transaction. A broker's only role is to help negotiate between the buyer and sellers, making the transaction run smoothly. Another common misconception is that brokers set the price of the item. They do not. Stockbrokers, mortgage brokers and the rest have no control over the price of the item. They can, however, advise the clients to go through with the sale or abort it if the price is undesirable.

Benefits

Clients on either side of the transaction benefit from engaging a broker, in that they can be absent from much of the negotiating. A broker is given the authority to negotiate on his client's behalf. Extensive conversations before the negotiation give the broker a clear idea as to how to best represent the client in the transaction, thus the client's presence is often not needed.

Significance

Brokers were once the merchants that could bring your favorite tea from across the ocean at a great price. The clients came to him when they wanted the tea and he got it. In today's Internet world, the broker's job has changed. He now pairs tea buyers to tea sellers, but does so on a larger scale, while trying to get the best possible price for the tea for both the buyer and seller. Mortgage brokers like LendingTree Financial Services has thousands of banking clients and even more potential borrowers. Through an online application, the company brings borrowers and lenders together while negotiating the best interest rates for the borrower.