What is an NBA Buyout and how is it different from a waiver?

No matter which NBA team you support, it’s a safe bet that they’ve had at least one player that just didn’t work out, and I’m not talking about rookies. It could have been a big signing that performed below expectations or a player that just didn’t fit their timeline in a trade. 

Teams and players sometimes just need to break up for the benefit of all parties involved. Fortunately, the NBA offers two mechanisms for such a split to happen – buyouts and waivers.

You might be wondering why there are two different ways of parting ways with a player. While both of them ultimately accomplish the same thing, i.e. removing a player from your roster, they do it in very different ways that have different consequences.

Buyouts

A buyout is an agreement between a team and a player where a player surrenders a part of their remaining guaranteed salary in exchange for an opportunity to immediately join another team. 

After buyout negotiations, the team pays the player an agreed-upon amount (lower than the remaining contract value) and releases them from their contract. The player in question is free to sign with the team of their choosing after they clear the 48-hour waiver period. (The player in question can also be picked up off waivers, but I’ll explain how that works in the next segment.)

Now the question is, why a team would ever want to buy a player out?

Reason #1: To Cut Losses

After all, isn’t it better to trade them and get something in return? Well, yes, but not all contracts are tradable, at least not without attaching sweeteners in the forms of picks, young prospects, expiring contracts, or a combination of the above.

Imagine a veteran player in the twilight of his career who’s only scoring 4 points a game but earning $25 million per season. Most teams would rather not keep the player on payroll – but that’s not a contract you can easily move!

In that situation, it’s best for the team to cut their losses by reaching a buyout agreement out for an amount less than their remaining salary instead of having them finish out the season and having to pay their salary in full.

Reason #2: When the player doesn’t fit their team’s timeline

A team, usually a lottery team who wants to get a look at young players late in the season, might also do it out of respect for a veteran that doesn’t fit their timeline.

It’s common for rebuilding teams to take veterans on bad contracts in trades if they come with draft picks or other useful assets. They’re part of the deal.

But these veterans usually don’t fit a rebuilding team (unless they just mentor the younger player) and so the team will buy them out so they can join a playoff contender that’s competing for a title. In cases like this, both the player and previous team are winners.

Either way, this frees up a roster spot for the team that bought a player out. Some of the most notable recent buyouts are P.J. Brown, LaMarcus Aldrige, Blake Griffin, and Andre Drummond. 

All were veterans on huge contracts that didn’t fit their original team’s timelines, and they were bought out as a result.  Each one joined a playoff team for title contenders shortly after their buyouts.

Waivers

However, if you just want to clear a roster spot as easily as possible, you might want to consider waiving a player instead.

The main difference between a buyout and a waiver is that, unlike a buyout, a waiver is a one-sided decision that a team takes when they want to cut a player from their roster. There is no negotiation between player and team.

This one-sidedness comes at a price as the team will be on the hook to pay the player’s entire remaining salary. 

That’s why you’ll often see players with large contracts bought out instead of waived. Waiving is usually reserved for players on cheap contracts when the team wants to quickly create a roster spot for a free agent signing.

You’ll also see players waived if a team makes a trade that leaves them with more than 15 players on the roster. Because the names involved in waiving usually aren’t as flashy, most waivers will fly under the radar of most NBA fans.

But what happens when a player gets waived? Just like with buyouts, the player who is waived goes on the so-called ‘waiver wire’.

Once that happens, the remaining 29 teams are notified and they have 48 hours to place a claim on them. Placing a claim means that the new team is willing to take on the remainder of the player’s contracts for its duration and amount.

Once the 48 hours are up, the team that is the lowest in the NBA standings wins the player’s contract. The team placing the claim must be able to incorporate the contract into their salary cap and the standard restrictions apply.

Bad teams don’t often place claims on big names on the wire because they want to stay bad to give themselves a better chance of getting a higher pick in the draft.

If there are no claims on a player’s contract, they become an unrestricted free agent once the 48 hours are up. You’ll probably hear this being referred to as “clearing waivers”. 

An unrestricted free agent can sign with any team they want, with some exceptions. 

The original team that waived or bought them out can’t sign them again for a period of at least one year or until their current contract expires, whichever is longer.

Interestingly, this was actually possible until about a decade ago and teams sometimes abused it.

The most well-known instance of this in NBA history is when the Cleveland Cavaliers traded their legendary center Zydrunas Ilgauskas, also known as Big Z, to the Washington Wizards. The Wizards waived him and the Cavs re-signed him after just 30 days. This was all part of an elaborate and complicated three-team trade by the Cavaliers to acquire Antawn Jamison from Washington.

Controversy and Criticism

There has always been a gap between the big market and small market teams in the NBA. 

Many perceive the buyout market to be one of the contributing factors to this gap because big market title contenders are often the preferred destinations for veteran contributors who clear waivers.

Make no mistake, these veteran buyout candidates are usually past their prime, but they’re still more than capable of contributing to a team. The team that signs them for the remainder of the season usually does so at a dirt-cheap rate compared to what such a player would command in terms of salary.

The small-market teams often say that this system just helps the rich get richer because it gives them a way to make significant additions to their team late in the season without having to give up anything but a tiny portion of their salary cap.

While buyouts are technically possible at any point during the regular season, only players signed before March 1st (according to the regular NBA season schedule) are eligible to play in the Playoffs. 

February is an especially active period for buyouts because of both the looming March 1st restriction and the NBA trade deadline which is usually sometime in February.

Since it represents the final opportunity for teams to bolster their roster before the Playoffs, teams will buy their players out on time to let them find a team where they’ll be able to compete for a title.

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