Uruguay international Coates has undergone a medical in the North East and has spent the day at the club’s training facility while he and the club wait for the deal to be completed.
Coates joined Liverpool from Uruguayan-side Nacional in 2011 and has made 24 appearances for the Merseyside-club, scoring twice.
Sunderland are also waiting to complete the signing of Inter Milan attacking midfielder Ricky Alvarez, again on a one-year loan deal.
Alvarez, who completed his medical on Sunday, has flown to Argentina for international duties while the deal is being finalised.
Two players appear to be making way for the new arrivals, with French centre-back Valentin Roberge on the verge of completing a one-year loan deal to Ligue 1 side Stade de Reims.
This comes after Sunderland confirmed on Monday that fellow French defender Modibo Diakite had left the club by mututal consent.
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