What is a Private Buyer

A private buyer is 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 event that there are problems with the transaction.

BREAKING DOWN Private Buyer

Private buyers are from the private sector, operating either as incorporated or unincorporated businesses or as individuals. Transactions with a private buyer typically carry more risk than those involving a public buyer, which generally refers to a government-backed entity in the public sector.

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 but would instead need to pursue legal action to recover monies owed.

Private buyers consist of consumers and businesses with distinct purposes and procedures for spending. The consumer market is comprised of millions of individual customers in different geographies with different buying habits. Consumer buying behaviors are influenced by basic needs, membership in groups, family requirements, occupation, age, economic situation and lifestyle choices. Psychological influences on buying include perception of certain products and brands, beliefs and attitudes.

The business market usually consists of fewer, but larger buyers often concentrated in specific geographic markets. Businesses generally form close and long-term relationships with their suppliers and negotiate the terms of purchases through contracts. Businesses can leverage their size and purchasing volume to obtain better pricing terms than smaller, individual entities.  

Differences Between Private Buyers and Public Buyers

Purchasing behaviors have traditionally differed between private and public buyers. While public buyers, such as a school district or municipal transportation system, have generally been focused on obtaining the lowest price, private sector buyers have taken a more flexible, results-oriented approach. This makes sense since most private sector buyers are for-profit enterprises seeking to maximize the value of their purchases. Public sector buyers, on the other hand, must adhere to institutional procedures and regulations and may simply be filling a quota or requirement.

The traditional lines between private and public buyers, however, are evolving, with each group adopting some of the practices of the other. Among private buyers, a greater focus on compliance, conflicts of interest and risk management has caused more purchasers to follow stricter rules in making purchases. Due to budget constraints and a greater accounting to taxpayers, public buyers are becoming more pragmatic in seeking the best result from their purchasing decisions.