The NBA Offseason Dictionary Series: Buyout Player

 

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A “buyout player” is one of the most common terms you’ll hear a reporter or analyst mention when discussing NBA contracts. That is why it's the topic of this week’s edition of “The NBA Offseason Dictionary Series.”

A buyout player refers to when a player and his current team both agree to terminate their existing contract before it is set to expire.

There are three steps to the buyout process.

1. Negotiation Phase: 

The player and the team will negotiate the remaining salary. Specifically, they will discuss how much of the player's remaining salary the player is willing to give up and how much the team is willing to forfeit to end the contract.

2. Entering Waivers: 

The player is placed on waivers once the buyout agreement negotiations have been settled.

Being placed on the waivers means that the player is temporarily (for 48 hours) made available for other teams to claim them before they are officially released from their contract.

Within this 48-hour window, teams can submit a claim to take on the player's current contract, including the remaining salary owed to them.

If one team submits a claim while the player is on waivers, that team automatically gets that player. However, if more than one team submits a claim for the same player, the player must sign with whichever team has the worst record. The NBA established this rule to give weaker teams a chance to improve their roster.

3. Free Agency: 

If a team does not claim a player on the waivers during that 48-hour period, then the player becomes an unrestricted free agent. For a refresher on unrestricted free agents, you can click here: The NBA Offseason Dictionary Series: UFA Vs. RFA. Buyout players usually sign for the veteran minimum or another small contract, as they are already receiving buyout money from their previous contract.

Example of a Buyout:

*Note, a player does not need to be traded to another team in order to be bought out. That just so happens to be the case for this example below. I want to present an example of a recent transaction with a notable player. Focus on the events after the trade.*

On July 18th, 2024, the Los Angeles Clippers traded Russell Westbrook, a 2025 2nd-round pick and cash to the Utah Jazz in exchange for Kris Dunn.

On July 20th, 2024, the Jazz and Westbrook agreed to a buyout.

On July 22nd, 2024, Westbrook became a free agent, as no team put a claim on him during the 48-hour period he was on waivers.

On July 29th, 2024, Russell Westbrook signed a 2-year, $6.8 million contract to become a member of the Denver Nuggets.

 
Reasons for Buyouts

Team Perspective:

Money Saver: Teams save money by not having to pay out the total remaining salary of a player. In the Russell Westbrook example, the reason the Utah Jazz agreed to a buyout is because Westbrook gave up $1.7 million in compensation.

Freeing Up Roster Space: Creates an open roster spot

If a Team is in the Rebuilding Stage: Teams in a rebuilding phase are focused on saving money and collecting draft picks. Buyouts are a good way to check off saving money.

Player Perspective:

Current Role with Team: Players might not be happy with the way they are being utilized on the court.

Relationship with Team: A player may have a negative relationship with another teammate or member of the franchise, tarnishing the experience for both sides.

Moving to a Contender: Veteran players who are on the back end of their career often are looking for their best chance at winning a ring, so they will terminate their contract to join a team in contention for the championship.

Bottom Line:

A player buyout is the most common way for a player and team to terminate a contract. Understanding the process and its importance is crucial, as it's one of the rare instances in the NBA where both the player and the franchise usually benefit from parting ways.

What would you do, if anything, to change the rules of the buyout process? Drop a comment below.