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What Are Brokerage Fees?

Individuals should examine the fine print of a brokerage contract to check for hidden fees.
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  • Written By: N. Madison
  • Edited By: Jenn Walker
  • Last Modified Date: 04 September 2014
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Brokerage fees are amounts a brokerage charges for transactions or services. For example, brokerage fees may be charged when a firm facilitates a sale between a buyer or seller, gives advice, or handles negotiations related to a transaction. Many people are most familiar with the brokerage fees that are charged by investment firms, but other companies in other industries may charge them as well. For example, a person may also pay brokerage fees for some types of insurance or loan transactions.

In some cases, brokerage fees are charged as a percentage of a transaction while in others they may be flat fees that are added to a transaction. There are even some companies that employ both methods of collecting brokerage fees. For example, a stock brokerage may charge a percentage of transactions that are below a certain amount and then charge a flat fee for all transactions above a minimum amount.

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While many people expect to pay fees when dealing with a stock brokerage, some are surprised to learn that mortgage brokers often charge fees as well. A mortgage broker helps potential home buyers to find and secure mortgages. For their efforts, they often add mortgage broker fees into the transactions in order to make money; this is often referred to as marking up a mortgage. Essentially, the broker receives a wholesale loan price from the lender and then adds money to it to come up with the retail price of the loan. His fee is the amount that is charged over the wholesale price of the loan.

There are also brokerage fees associated with some types of insurance transactions. In some cases, insurance brokers may receive commissions from the insurance companies for which they make sales. In others, however, broker fees may be paid by the person or organization who buys the insurance. Interestingly, insurance brokerage fees are not always paid by just one person or organization. In some cases, insurance brokers may collect fees from both the buyers and the sellers of insurance.

An individual may do well to perform a little research before choosing a brokerage. Different brokerages charge different fees, and doing comparison shopping may help a person to save money. Additionally, an individual will do well to read the fine print on any disclosures or contracts. Doing so allows him to make sure he fully understands what he is signing and how much a transaction, purchase, or account will cost him.

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