The Crystal Palace captain led Crystal Palace when they claimed victory in the Community Shield against the Merseyside club in August.
Within 34 days, Crystal Palace captain the defender will be free to join a European club when his contract expires on 30 June.
The defender can agree to a pre-contract agreement with a team overseas when the January window opens on New Year's Day 2026.
The Anfield club missed the opportunity to buy the England centre-back for £35m in the off-season. The prolonged negotiations, which dragged on during the window, ended when the London club were unable to secure a suitable replacement.
It meant the Selhurst Park side missing out on a sizable sum for the player with only one year remaining on his agreement, but kept their talisman after losing another star to a rival club a short time before.
The club are still keen to revive their pursuit, though there are uncertainties the move will materialise.
The defender now has other options and it is believed elite teams in the continent have already expressed an intention.
Guehi, though, is not the sole prominent centre-back who might be available on a free deal next summer.
The Merseysiders' own Ibrahima Konate has also been linked with a move to Real Madrid at the end of his current deal, possibly emulating in the path of ex- defensive partner the right-back.
However, reports on recently suggested Los Blancos have ended their reported chase, with little firm intent apparent.
His unresolved situation has been widely cited as a factor for his poor form.
The Spanish club could part with players the German, 32, and David Alaba, 33, this transfer window with each about to enter the final seven months of their agreements.
It leaves Guehi and Dayot Upamecano as possibilities if they are to join the free market to reinforce at defense - a approach they have employed several times in recent seasons.
Guehi Matches The Club's Model
The La Liga side have an attraction in the Englishman and he aligns with a evident squad need at centre-back.
Dean Huijsen has stepped up as a starter, but Eder Militao and the experienced defender have both had fitness concerns. Rudiger is now in his thirties, Raul Asencio has not fully convinced and the veteran has lost pace after a long spell on the bench.
The Crystal Palace man, a proven Premier League defender with character, speed and plenty of sound judgment, is seen as the kind of stabilising presence who can challenge straight away for minutes.
His case fits with Madrid's wider transfer policy: three kinds of deals. First, the promising player who can develop into a superstar. Next, the cost-free but proven individual, where heavy bonuses replace fees.
Finally, the high-cost signing reserved for particular targets considered as instant starters.
