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Liquidity Risk

Definition of "Liquidity risk"

William Keeler
  Dale Sorensen Real Estate

  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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