A broker is an individual person that arranges transactions between a buyer and a seller for a commission when the deal is executed. A broker who additionally acts as a seller or as a buyer becomes a principal party to the deal. Distinguish agent—one who acts on behalf of a principal.

Definition

A broker is an independent agent used extensively in a few industries. A broker's prime responsibility is to bring sellers and buyers together and thus a broker is the third-person facilitator between a buyer and a seller. An example would be a real estate broker who facilitates the sale of a property.

Brokers additionally can furnish market information regarding prices, products, and market conditions. Brokers might represent either the seller (90% of the time) or the buyer (10%) but not both at the same time. An example would be a stockbroker, who makes the sale or purchase of securities on behalf of his client. Brokers play a huge role in the sale of stocks, bonds, and additional financial services.

There are advantages to using a broker. First, they know their market and have already established relations with prospective accounts. Brokers have the tools and resources to reach the largest possible base of buyers. They then screen these potential buyers for revenue that would support the potential acquisition. An individual producer, on the additional hand, especially one new in the market, probably won't have the same access to customers as a broker. An Additional benefit of using a broker is cost—they might be cheaper in smaller markets, with smaller accounts, or with a limited line of products.

Before hiring a broker, it might be considered prudent to research the requirements relating to someone using the title. Some titles, such as real estate brokers, often have strict state requirements for using the term, while others, such as aircraft brokers, typically have no formal licencing or training requirements.

Etymology

The word "broker" derives from Old French broceur "small trader", of uncertain origin, but possibly from Old French brocheor meaning "wine retailer", which comes from the verb brochier, or "to broach (a keg)".

Types of brokers