The Hungary Under 21 international has yet to make a first-team appearance for the Anfield club since his move from MTK Budapest in 2008.
The 22-year-old has reportedly flown to Spain to undergo a medical with Xerez, who finished 14th in the Segunda Division last season.
However, his agent Tibor Pataky revealed that the Reds would prefer to loan him to an English club.
"The deal is not done because Liverpool basically plan to let Peter go on loan within England," Pataky told Pepsifoci.com.
"We think this Spanish possibility could be a great chance for him so we're working until the last moment to validate the agreement between the two clubs."