The Iceland international started his professional career with the Royals before moving to Hoffenheim in 2010 after impressing at the Madejski Stadium.
"We tried to bring him back. We had spoken to Spurs and we made three offers," said McDermott, giving away that it was in fact Sigurdsson and not Blackpool's Tom Ince that his club were planning on paying a club-record fee for.
"I thought at one stage we had a real chance of doing a deal, but unfortunately, we couldn't manage to do it.
"Gylfi is a Tottenham player, but we've known him since he was 12-13 years old and it would have been great to bring him back."