The 24-year-old is out of favour under Madrid manager Zinedine Zidane and has made just four La Liga appearances so far this term, all as a late substitute.
According to Spanish publication Diario Madridista, Isco's contract ends in 2018 and Madrid are tempted to cash out next summer rather than offer him a new deal.
Asked recently about his contract situation, Isco told Marca: "The truth is that I have not yet thought about it, nor have they asked me to renew, so I am calm. I take it day by day, which is important.
"It seems a little weird [that Real haven't spoken about it yet], but I can't do anything. If they don't want me to renew, I won't go asking for it. It's something for the club to decide, not me."
Isco joined Madrid from fellow La Liga side Malaga in 2013 in a £25m deal.