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Definition: Forced Liquidation Value
Liquidation value is the price of an asset which is estimated when insufficient time is given to the seller to come to the fair market price of the asset. Here the time of exposure to the buyers is limited. Liquidation value may be forced or orderly liquidation value. These two differ on their exposure time given to the buyers.
Forced liquidation value, also known as auction value, specifically refers to an auction kind of selling of assets. In this case assets are auctioned for one or two days and are sold the buyer bidding the highest. Negotiation of any kind is not allowed. It is assumed that the seller is in dire need of selling the asset for the sake of business which causes buyers to take advantage and hence the seller is being forced to sell it as a price lower than the fair market price. Thus the forced liquidation value is almost always lower than the fair price.
On the other hand, in orderly liquidation value, the exposure time is increased, but not sufficient enough to estimate exact market price.
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