Imanol Alguacil has been in temporary charge of first-team affairs at Anoeta since March after the sacking of Eusebio Sacristan and has guided the club to 10th place in the Spanish top-flight standings with one game to go.
The 46-year-old has a contract until the end of the campaign and Real will look to appoint a permanent boss in the summer.
Former Sociedad goalkeeper Roberto Olabe was appointed as the club’s director of sport in March and is the man charged with the task of identifying the next coach, with Gracia said to be on his list of possibilities, according to Marca.
Unai Emery, who has now left Paris Saint-Germain, and Leganes coach Asier Garitano are the other two names mentioned in the report, with the latter thought to be in pole position for the post.
It is said that Gracia ‘welcomed the proposal’ despite signing an 18-month deal with the Hornets when replacing of Marco Silva at Vicarage Road in January.
Watford’s ‘hire-and-fire’ policy means that managers at the club are constantly looking over their shoulders and it is no surprise that Gracia is happy that other clubs also value his work.
Bayer Leverkusen have signed keeper Lukas Hradecky from Eintracht Frankfurt ahead of Bernd Leno's likely exit.