However, Sounders general manager Adrian Hanauer suggests that a deal could still be done before the close of the MLS transfer window on Saturday.
"(Saturday) is the roster freeze, so by then something will be figured out for sure," Hanauer said.
"But we're going to sit down with (him) and his representation and see what opportunities there might be.
"He would probably go back (to Iceland) whether he was signed or not signed, to get himself organized. But again, we've got our work cut out for us to try to come up with a way to keep him."