DEFINITION of 'Private Buyer'

An individual or organization that is purchasing an asset and whose actions are not backed by a government or government agency. The private buyer is responsible for all costs associated with the transaction, and parties to the transaction can only pursue the private buyer for recourse in the case that there are problems with the transaction.

BREAKING DOWN 'Private Buyer'

Transactions with a private buyer typically carry more risk than those involving a public buyer, which generally refers to a government-backed entity.

For example, a private buyer might be a company that is purchasing the mortgage of a property. Because the company is not backed by the government, it does not have the "full faith and credit" that a governmental organization would. If the company fails to make mortgage payments, the party that sold the mortgage will not have the recourse of seeking payment from the government.

RELATED TERMS
  1. Financial Buyer

    A type of buyer in an acquisition that is primarily interested ...
  2. Privatization

    1. The transfer of ownership of property or businesses from a ...
  3. Sale

    1) In general, a transaction between two parties where the buyer ...
  4. Purchase-Money Mortgage

    A mortgage issued to the borrower by the seller of the home as ...
  5. Settlement Agent

    1. The party involved in completing a transaction between a buyer ...
  6. Earnest Money

    A deposit made to a seller showing the buyer's good faith in ...
Related Articles
  1. Small Business

    How To Invest In Private Companies

    Owning a private firm means sharing more directly in the underlying firm’s profits.
  2. Investing

    Explaining Privatization

    For a publicly traded company, privatization is the act of transitioning the company to ownership by private individuals.
  3. Investing

    Arm's Length Transaction

    An arm’s length transaction describes business deals in which the buyer and seller act independently and with no interest in the other’s benefit.
  4. Investing

    Advantages of Public Vs. Private Companies

    A privately held company is owned by its founder, management or a group of private investors.
  5. Investing

    The Ins And Outs of Seller-Financed Real Estate Deals

    There's more than one way to buy or sell a house. Seller financing presents yet another unique option.
  6. Managing Wealth

    Rent-To-Own Homes: How The Process Works

    Here's what to watch for when negotiating a contract for a rent-to-own home – and who is a good candidate for this option.
  7. Investing

    What is the Secondary Market?

    The secondary market is where investors purchase securities or assets from other investors, rather than from the issuing companies themselves.
  8. Insights

    Crowding Out Effect

    Crowding out effect is an economic term referring to government spending driving down private sector spending, and can have several more specific meanings.
  9. Personal Finance

    Why Mortgage Applications Just Dropped 12%

    Mortgage applications took a steep dive at the end of 2016. Is a housing slowdown coming?
  10. Small Business

    Public Vs. Private Tech Valuations: What's Driving the Divide?

    The gross valuations over the past five years are more indicative of the market than the true value of the company itself.
RELATED FAQS
  1. What is an assumable mortgage?

    The purchase of a home is a very expensive undertaking and usually requires some form of financing to make the purchase possible. ... Read Answer >>
  2. How are arm's-length transactions determined by law?

    Determine if transactions are conducted at arm's length by checking if the parties to a contract are independent and transact ... Read Answer >>
  3. What is a bank's legal liability when issuing a letter of credit?

    Learn the responsibility of banks that issue letters of credit Letters of credits ensure payment on transactions between ... Read Answer >>
  4. How does privatization affect a company's shareholders?

    The most recognized transition between the private and public markets is an initial public offering (IPO). Through an IPO, ... Read Answer >>
Trading Center