It absolutely is how it works. It wasn't an obligation to buy him, just an option. If they deem he's not worth that value after what is effectively a year long trial, then why should they pay that? The option exists because often the loaning club is paying a sizeable loan fee so it's essentially a discount off the final value if they do want him, plus it also protects them for taking a punt in the case that the player has a breakout season and there value suddenly sky rockets. As the 'selling' club, you're hoping that it incentives the other club into going for that player as the optics of the deal are much better generally.
The fault, as always, lies with us and our decision to loan these players out without and guarantee of selling them