In response to numerous questions I’ve received about how buyouts work in the NBA, and how the Thunder can benefit, I’ve put together this quick Q&A.
What is a contract buyout?
Well, when mommy and daddy don’t love each other anymore…
But for reals, a buyout happens when a player and the team he plays for agrees to reduce or eliminate the remaining amount of guaranteed money remaining on his contract. He is then waived. If the waiver happens during the season, he is on waivers for 48 hours. If he goes unclaimed, he becomes a free agent and is then free to sign anywhere he wishes.
Can the Thunder sign one of these bought-out players?
Yes. In fact, trading D.J. Augustin and Steve Novak to Denver for Randy Foye at the trade deadline opened up a roster spot. Even if they had a full 15 man roster, the Thunder could waive an existing player in order to sign another.
How much can the Thunder offer?
The very least the Thunder can offer is the pro-rated veteran’s minimum. That amount varies depending on a player’s years of service in the league and at what point in the season the contract is signed. For example, Anderson Varejao is a 10+ year veteran. He just signed with the Warriors for the remainder of the season for a little more than $450,000. Part of that is paid by the league under the terms of the Minimum Salary Exception. All told, the Warriors are on the hook for nearly $290,000.
The Thunder is in position to offer more. They still have their Mid-Level Exception available. It began to prorate beginning on January 10, so it’s time-dependent just like the Minimum Salary Exception described above. Its value is currently approximately $2.4 million. The Thunder could offer all or part of that to entice a bought-out free agent to sign with them.
Does money actually matter to players who get bought out?
As always, Your Mileage May Vary (YMMV). Some players leave money on the table in order to get out of their current situation and onto a contender, but not every player. Two years ago, Caron Butler agreed to take $1 million less from the Bucks to get out of his contract, but recouped that $1 million from Oklahoma City. Just last week, David Lee gave up roughly $450,000 to get out of Boston, but snagged $2 million from Dallas.
Needless to say, it never hurts to have more money to offer. It’s the great equalizer. But most often, a player also wants to have defined role wherever he lands.
Didn’t the Thunder just save a bunch of money?
By dealing Novak to the Nuggets as part of the Augustin/Foye swap, the Thunder saved nearly $9.8 million in luxury taxes and payroll.
Why would the Thunder spend money after going through the effort to save it?
If the Thunder could take the cost of having Steve Novak as a 14th man and roll it into the cost of a productive rotation player, that’s a win. And even if the Thunder come up empty in the buyout market, that’s saved money that will come in handy in future seasons when certain someones become free agents.
Can other teams offer more than the Thunder can?
Portland, Philadelphia, Orlando and Utah are all below the salary cap and can offer more. Charlotte could tap into the larger Nontaxpayer Mid-Level Exception and pay up to nearly $3.9 million. Several other teams, such as Atlanta, Boston, Detroit, and Miami have the pro-rated Room Exception worth nearly $2 million they can use. In terms of pure cash, the Thunder has an advantage.
What would be the luxury tax hit of signing a player at this point?
If the season ended today the Thunder would be a roughly $8.8 million over the luxury tax line, resulting in a tax of over $14 million. For every dollar they spend up to $10 million over the tax line, it’ll cost them an additional $1.75 in tax. Every dollar spent between $15 million and $20 million above the tax line would cost them $2.50.
For example: If they added another $1.1 million in payroll, it could cost them an additional $1.93 million in luxury tax. If they spent an additional $2.4 million in payroll, it’d cost another $5.1 million in tax.
The Thunder isn’t going to get anyone, will they?
Reality check: Anderson Varejao went to Golden State because, thanks to injuries, they have a role for him AND a damn good chance to win a title. Cleveland is going to be an attractive destination because of LeBron James and geography. It’ll be far easier to get to the NBA Finals in the East than in the West. Such is life.
When Derek Fisher was waived by the Rockets in 2012, I remember thinking that he was probably headed to Miami. I thought the same when Caron Butler was bought out by the Bucks in 2014. But the Thunder had more cash to offer in those cases and secured their services.
On the flip side, it’s fair to debate the overall impact of those signings in hindsight. So even if the Thunder don’t land, say, Joe Johnson, it doesn’t mean all is lost.
Still, unless Kawhi Leonard hits the waiver wire there won’t be anyone that will fix the Thunder’s defense and add an additional offensive threat. The Thunder may be able to help address some of their issues, but the majority of them are only addressable internally.