Definition of "Liquidity risk"

Sandy Wickware real estate agent
Sandy Wickware, Real Estate Agent Fathom Realty

  1. Risk that an individual may have to sell assets at distressed prices to raise funds. An example is a homeowner who must sell his house at a low price because he cannot afford to make mortgage payment after losing his job.
  2. Risk that a person may not have sufficient funds to make payments on debt, rent, and so on.
  3. Risk that a business will have inadequate cash flow and/or working capital to satisfy ongoing expenses, pay creditors and lenders, maintain capital facilities in proper working order, and so on. An example is an owner of commercial property that is unable to properly maintain it because of a lack of funds. As a result, tenants may relocate.

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Comments for Liquidity Risk


Marina Marina said:

I am looking for statistics on real estate liquidity risk. How high is it on average? Second, I need statistics about transaction fees for selling real estate.

Feb 23, 2020  11:39:49

 
Real Estate Agent

Hey Marina! Coming up with statistics for real estate liquidity risk is highly dependent on the area. Liquidity risk comes as a result of inadequate cash flow that doesn’t allow an individual or a business to satisfy ongoing expenses. In real estate, for example, owners who are not able to maintain their properties because of the lack of funds may result in tenants relocating. Or, for real estate investors, it may be their inability to sell a property at the correct value because the market lacks in buyers. Therefore, all these factors are highly dependent on the area the real estate transactions take place. Is it a seller, or a buyers market? Is the area seeing property appreciation or is it devaluing? Statistics on liquidity risks vary from one place to another.

Apr 13, 2020  08:16:14
 

 

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