Liquidation value
Liquidation value represents the amount a property is expected to bring when it must be sold in a compressed timeframe or under adverse circumstances, typically below normal market value. It reflects the reality that forced or urgent sales command lower prices than transactions with normal marketing periods.
This metric is essential for:
- Assessing loan-to-value ratios and security coverage in mortgage portfolios
- Stress-testing collateral adequacy during default scenarios
- Calculating potential losses in distressed asset transactions
- Risk management in investment appraisals and portfolio analysis
Liquidation values typically range from 70–85% of appraised market value, depending on asset type, market conditions, and urgency.
