What Does a Brokerage Firm Do?
A brokerage firm is a firm that acts as a liaison between a seller and a buyer. There are many products and services a brokerage firm can broker. Most people know about brokers for stocks and bonds, but aren't aware that there are brokers from fine arts to real estate. Overall, the verb "broker" means to bring a seller and buyer together to handle all intermediary duties for a sales transaction to occur. Here are some of the intermediary duties of a broker from start to close of sale.
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Brokers for the Seller
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A brokerage firm that represents the seller will assist in finding a buyer for the product or service that seller has to offer. Once the buyer is secured, the buyer makes and offer to the seller through the firm.
Brokers for the Buyer
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A broker that represents the buyer will act as a liaison to communicate with the broker of the seller. These brokers are interested in securing the best deal for their client.
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How Firms Make Money
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Brokerage firms are contracted on commission, which means that if a sell doesn't occur, the broker makes nothing. This is why firms must make sure they match sellers with the most probable buyers, which requires extensive market research.
The Middle Man
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Without brokerage firms, the consumer market would be completely free trade, meaning there would be no way for a buyer or a seller to influence the market--anyone could sell/buy anything at any price.
Supply and Demand
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When there is a demand for a product, there will be a demand for a brokerage firm to broker that product. Brokers help to keep the cycle of supply and demand in existence.
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Resources
- Photo Credit investmentbrokers.us
