Colombia striker Falcao joined Manchester United in a season-long loan move from Monaco on Monday.
The 28-year-old had been heavily linked with a switch to the Santiago Bernabeu but a move did not come to pass as United won the race for his signature.
And Falcao's father Radamel Garcia indicated that Real – who brought in Toni Kroos, James Rodriguez and Javier Hernandez in the transfer window – were reluctant to splash the cash to take the former Atletico Madrid back to the Spanish capital.
"The deal with Real Madrid did not happen because if you have money and you go to the market to buy a shirt or a pair of trousers, you have to decide whether to buy it or not," Garcia is quoted as saying to Colombian radio station LA FM.
"Real Madrid chose not to.
"I don't know, I have the feeling they wanted the player for free with a number of conditions.
"In any case, they bought the trousers and shirt they wanted and they considered that to be better.
"We have to accept it."
Garcia also revealed that a number of clubs across Europe were interested in Falcao and that Arsenal made a last-ditch attempt to lure him to the Emirates Stadium.
"The clubs that showed an interest in him were Juventus, Manchester City, Liverpool and Arsenal at the last minute," Garcia added. "Fortunately, he has arrived to Manchester United, a great club.
"Thank God everything came through with United.
"Radamel is a person who has given a lot in Europe and has always deserved the best for all the effort, all the sacrifices he has made during his football career.
"United is the most important team in England and one of the most powerful from an economic standpoint.
"Now it's his [Falcao's] turn to give his best, to be ready and continue to win titles."
