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. Going Private

    A transaction or a series of transactions that convert a publicly ...
  2. Financial Buyer

    A type of buyer in an acquisition that is primarily interested ...
  3. Third-Party Transaction

    A third-party transaction is a business deal involving a buyer, ...
  4. Assumable Mortgage

    A type of financing arrangement in which the outstanding mortgage ...
  5. Transaction Costs

    Expenses incurred when buying or selling securities. Transaction ...
  6. Settlement Agent

    1. The party involved in completing a transaction between a buyer ...
Related Articles
  1. Investing

    Housing Deals That Fall Through

    Find why buyers back out and what you can do if you're left holding the bag.
  2. Small Business

    How To Invest In Private Companies

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

    Explaining Privatization

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

    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.
  6. Personal Finance

    Why Mortgage Applications Just Dropped 12%

    Mortgage applications took a steep dive at the end of 2016. Is a housing slowdown coming?
  7. 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.
  8. 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.
  9. Investing

    Can I Afford a House in 2016?

    Start the homebuying process in 2016 before mortgage rates increase. More sellers are expected to list their homes, resulting in less competition for buyers.
  10. Investing

    Contingency Clauses In Home Purchase Contracts

    Here, we introduce widely used contingency clauses in home purchase contracts and how they can benefit both Buyers and Sellers.
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. What's the difference between a letter of credit and a bank guarantee?

    Learn how letters of credit and bank guarantees differ, how they are used by banks and companies, and how buyers apply to ... Read Answer >>
  3. What are the benefits of an assumable mortgage?

    An assumable mortgage allows the purchaser of a property to assume the mortgage from the property's seller. The benefits ... Read Answer >>
  4. How can I sell private company stock?

    In some instances, both private and public companies may issue shares to their own employees as part of a compensation program. ... Read Answer >>
Trading Center