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NBA Free Agency – Everything You Need to Know

NBA Free Agency - BIXLER

In professional sports, a free agent is a player who is eligible to sign freely with any club or franchise, not being under contract to any specific team. Three types of free agents exist when it comes to NBA free agency.

Unrestricted Free Agent

Unrestricted free agents are players without a team. They have either been released from their club, had the term of their contract expire without a renewal, or were not chosen in a league’s draft of amateur players. These people, generally speaking, are free to consider offers from all other teams and to decide with whom they want to sign a contract.

In the NHL, unrestricted free agents are players with expired contracts. They are free to sign with any franchise. A player may only declare himself to be an unrestricted free agent if he is over the age of 27 or has played in the league for a minimum of 7 years.

NBA Free Agency - BIXLER

Restricted Free Agent

The specific rules of restricted free agency vary among the major professional sports, but in principle it means that a player is currently signed to one team but is free to solicit contract offers from other teams; however, this player cannot sign with the competing club if the current club matches (or in some leagues, comes within 10% of) the terms of the offered contract. For a restricted free agent, some leagues require the competing team to offer to the original team one or more draft picks, when an offer is not matched, as compensation for losing the player.

Undrafted Free Agent

Players who are not drafted in a league’s annual draft of amateur players are considered to be unrestricted free agents and are free to sign contracts with any team. In most North American professional sports, players are drafted by sequencing each team from worst to best. Players that pass through an entire draft without being selected by any of the league’s teams become unrestricted free agents, and these players are sometimes identified simply as an undrafted free agent and are free to sign with any team they choose.

This can occasionally occur in the National Hockey League, which increasingly uses college hockey as a source; the NHL Entry Draft usually drafts players during high school age (i.e., junior leagues), which allows overlooked players who excel at the college level or in European professional leagues to bypass the draft and sign directly with the NHL. In addition, any player at least 22 years of age who has not been selected in the NHL Draft can sign with any team as a free agent.

Economics of NBA Free Agency

The economics of free agency are disadvantageous for team owners; it can lead to bidding wars. Restrictions on free agency have therefore been preferred by North American team owners since the abolition of the reserve clause. For example, a draft can be used to keep young and talented players from generating bidding wars and causing higher player salaries throughout the league. Furthermore, some teams which play in large market cities, and hence have a larger revenue stream, would be able to outbid other teams for talented players. Some leagues, such as the National Football League and the National Basketball Association have imposed salary cap rules in order to avert such bidding wars.

NBA Free Agency - BIXLER

Restricted Free Agency

A restricted free agent can sign an offer sheet with any team, but the player’s original team can retain him by matching the terms of that offer. The original team is said to have the “right of first refusal.”

Offer Sheets

When a restricted free agent wants to sign with another team, he and the new team sign an offer sheet. The terms of that deal — which must be for at least two seasons — are given to the player’s original team, which has two days to match. If the team matches, then the player is under contract with his original team, but at the principal terms of the offer sheet. If the team passes on matching within two days, the player is under contract with the new team.

The team making the offer must have enough salary cap room for the offer sheet and must maintain that room until the offer sheet becomes official or the original team exercises the right of first refusal. The original team cannot match an offer greater than its salary cap room. That original team must have room for both the regular salary and any unlikely bonuses the offer sheet includes.

NBA Free Agency - BIXLER

Unrestricted Free Agency

An unrestricted free agent is free to sign with any team. Once they sign, they are a part of that new team. However, some unrestricted free agents have options on their existing contracts that, if exercised, may impact their choices. The Free Agency Moratorium is a negotiation period from July 1-6 in which teams may not sign most free agents or make trades. Starting at 6:01 p.m. on June 30, teams may negotiate deals with free agents but cannot officially sign them until Noon on July 6.

Any deals struck during the moratorium period are characterized as agreements, but do not count toward team salary and are not binding for the player or team. Either side can back out in this situation — a scenario that took place in 2015 when DeAndre Jordan reneged on his verbal agreement with the Dallas Mavericks to instead re-sign with the then-incumbent LA Clippers.

Team Options

A team option grants the original team the right to keep a player for another year. If a player has a three-year contract with an option for the fourth season, this means that if the option is exercised (by the team), the contract extends through the fourth season. If the option is not exercised, then the contract ends after the third season.

Once an option is exercised it cannot be revoked, i.e. the team can’t change their mind of the option once they exercise it. Conditional team options are not allowed, which means the option cannot be contingent on something like the number of games played, team wins, or scoring average.

Player Options

A player option grants the player the power to decide whether to stay for another year or become an unrestricted free agent. If a player has a three-year contract with an option for the fourth season, it means that if the option is exercised (by the player), the contract extends through the fourth season. If the option is not exercised, then the contract ends after the third season. 

Salary Cap Exceptions

There are 11 types of Salary Cap exceptions that are available to NBA teams. These exceptions allow teams to exceed the salary cap.

Love NBA? Check out our blogs on women in the NBA and the Toronto Raptors win over the Golden State Warriors.

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