In theory, when an NBA team signs a player, the plan is for that to work out and be successful. However, for a litany of reasons, that doesn’t always happen.
When a team and player reach the decision that it’s best to part ways, there are a few options on the table.
While trading tends to steal a lot of the limelight, the buyout market is often where teams who feel like they’re on the cusp of a title make a move or two to strengthen the roster.
In this post, we’ll break down how NBA contract buyouts work, why teams use them and how it benefits both parties.
How Does a Contract Buyout Work?
A contract buyout is when a team and a player mutually agree to terminate a contract prematurely, by having a player give up a portion of their salary to become a free agent.
But there is a bit of a catch. If both parties reach an agreement, the player doesn’t immediately become a free agent. Instead, they are released to waivers.
That means other teams have 48 hours to claim the player. Every team is eligible to submit a waiver claim on a player, but if multiple teams submit a claim then the team that is lowest in the standings is awarded the player.
If a player goes unclaimed on waivers, then he becomes a free agent who can sign with any team.
The main distinction between a buyout and waiving a player is the money. If a player is waived, the team still has to pay their remaining salary. If a buyout is agreed, then the player is usually forfeiting some of what they are owed.
Why Do NBA Teams Offer Buyouts?
Typically, a team offers a contract buyout to gain flexibility. Whether that’s from a roster perspective or a financial one depends on the situation.
Completing a buyout allows a team to clear any remaining salary from their payroll, opening up funds to acquire additional talent down the line. But in some cases the financial aspect is an added bonus, not the main component. Sometimes a team has too few minutes to go around, so they will opt to prioritize developing younger players.
Why Do NBA Players Agree to Buyouts?
For most players, a career in the NBA comes down to three things: playing time, winning a championship and money.
Obviously, contending teams aren’t looking at their roster and trying to work on contract buyouts. For teams on the outside of championship contention looking in, a contract buyout can be beneficial for a player because they could sign with a contending team looking for a key addition.
In some cases, disagreements with coaching or management can result in a player’s role disappearing. So getting back to rotational minutes for another team might be the goal. And while we tend to forget that professional athletes are still human, there are occasions where a change of scenery is needed.
Salary Cap Implications of an NBA Buyout
Whatever the player agrees to forfeit is subtracted from said player’s cap hit. So if a player was owed $20 million and agreed to a $12 million dollar buyout, the $8 million which was given up would be directly removed from the team’s books.
And while there are no deadlines for contract buyouts in the NBA, there is a deadline for players to participate in the playoffs.
A player can sign with a new team and retain their playoff eligibility only if their contract was bought out before the March 1 deadline. Any player who was waived after March 1 can play during the regular season but not the playoffs.
NBA Buyouts With Immediate Impacts
Boris Diaw (2012): Diaw agreed to a buyout with the Charlotte Hornets (then Bobcats) in 2012, joining the San Antonio Spurs. At the time, Diaw was criticized for his attitude and weight problems. However, he became a key player for the Spurs, particularly during the 2014 championship run. Diaw averaged 9.2 points per game, 4.8 rebounds per game and 3.4 assists per game during the 2014 playoffs.
Derrick Rose (2018): A former MVP, Rose was considering retirement in 2017 after years of knee and ankle injuries. He was traded to the Utah Jazz and waived, signing with former coach Tom Thibodeau and the Minnesota Timberwolves. Rose didn’t do much to finish out the 2017 season but rebounded in a big way the following year. Rose was in the running for both Sixth Man of the Year and Comeback Player of the Year, averaging 18 points per game.
This article was originally published on www.si.com as What Is a Contract Buyout in the NBA?.
