The 33-year-old has been linked with Manchester United and Blackburn Rovers but could be set for a switch to the Bundesliga instead.
Schalke boss Felix Magath confirmed negotiations were taking place with Raul but insisted a deal may not be reached for a month.
"We are interested in him and are negotiating with his agent," Magath told Bild.
"The player has not decided yet and wants time until the end of July to make up his mind.
"It would be a huge signing for Schalke and the whole Bundesliga."Raul has been at Real Madrid since since 1992, scoring 323 goals in 741 games and is regarded as a legend amongst supporters.
But the former Spain captain appears to be surplus to requirements at the Bernabeu and could be released from his contract one year early.