In economics, the term used to define the commission of a broker in doing business with parties is called "brokerage". To make the term easier to understand, it is the compensation of an agent. A broker is an agent. He is a person who buys and sells for another person. He may be someone who arranges contracts of various types. He plays as a mediator between two people or companies who are negotiating on something, may it be a stock in the stock market or anything else being sold.
We can also define the term as the fee collected by a licensed broker, as compensation or payment for procuring the sale, and representing a buyer and/or seller during a timeshare sales transaction. A brokerage fee is typically collected only after the sale is finalized. Parties involved in such transactions make sure that the deal has been closed and is already final before paying the broker. This is to make sure that business is settled before giving any commission.
Another usage for the term brokerage refers to firm or an organization that bridges the transaction gap between the purchaser and the seller and popularly known as “brokerage firms”. A broker or a brokerage firm oversees and facilitates the process of selling and buying stock shares. The power of the broker or a brokerage firm may vary depending on the share holder’s decision. Especially when a broker or a brokerage firm is holding transactions that involves large amount of money.
The main goal of any broker or a brokerage firm is to process and complete all the necessary documents, gather needed signatures and collects payment from the buyer and deliver it to the seller. They are the middle of the transaction and since they are making it easier for the buyer and the seller to transact, the broker is well compensated, from either party or from both parties.
Brokerage firms can also be employed to do real estate transactions as well as the buying and selling of valuable goods. E.g. Acquiring antiques or priceless art, services companies such as restaurants, grocery stores, and etc… hires brokerage firms to do the purchase of the products and goods that are selling. With these kinds of transactions, usually, brokerage firms does not really earn that much from the buyer since they have most likely received a commission from the seller instead they are gaining profit out of the marked-up price of goods that is being sold to the buyer.
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