The Athletic's Matt Barrows reported Tuesday that Shanahan envisions Reid as a "backup, league-minimum-type" behind Jaquiski Tartt in the depth chart.
Shanahan expressed skepticism about Reid's willingness to sign knowing he wouldn't start in San Francisco's secondary.
"We can't give a lot of money to backups and that's what Eric would be," Shanahan said, per the Bay Area News Group's Cam Inman. "It would be great to have him in that role but I don't think Eric's interested in it."
Reid has appeared in 70 games over his NFL career, with all but one of those in a starting capacity.
The 30-year-old remains unsigned despite finishing 2017 with 67 combined tackles and two interceptions in 13 games. He finished 10th in Bleacher Report's NFL1000 year-end strong safety rankings. B/R's Doug Farrar described Reid as "one of the NFL's more versatile safeties" and "a major asset for any team looking to expand its nickel and dime coverage looks."
Reid was among the first players to join the protest movement, kneeling alongside former teammate Colin Kaepernick during the national anthem in protest of police brutality and racial injustice. He told reporters in March he doesn't plan on protesting during the national anthem were a team to sign him for the 2018 season.