Chelsea have had two offers rejected for the player this summer but they are still keen on signing him before the transfer window closes.
Redknapp hopes the Croatian stays, but admits the situation is difficult.
"You either sell him, go out and bring three or four players in and have a better team, probably, in all honesty, or you keep him," said Redknapp.
"When someone comes along and offers to treble your wages and gives you the chance to play in a team that can win the Champions League, it's not easy. He has had his head turned and it's difficult for him."
Redknapp, mindful of how Dimitar Berbatov's deadline day sale to Manchester United left Spurs short in 2006, does not think chairman Daniel Levy will allow the same scenario to play out with Modric.
"He won't do that, no chance," Redknapp added.
"Daniel wants to keep him and it's looking like we could get one or two players in over the next few days."