Restricted Free Agency, or RFA, has long been a thorn in the side of NBA franchises, as it allows opposing teams to set the market on a player who the incumbent team has struggled to peg down financially.
Furthermore, when a team forego the option of extending a player, the trade value of that player diminishes dramatically during his fourth season, as any interested team would have to take on the headache of dealing with RFA negotiations throughout the summer.
That’s why forward Rui Hachimura, who was sent to the Los Angeles Lakers on Januray 23rd, could be had for Kendrick Nunn and three modest second-round draft picks. It’s not that the Washington Wizards received equal on-court value back for shipping out the Japanese forward to the Los Angeles Lakers. But they did get fair value, given the aforementioned circumstances. Those two elements differ greatly.
Essentially, the biggest problem with RFA is the unknown long-term financial status of the player being traded.
The Lakers, in theory, have no clue what the market is for Hachimura going into the 2023 offseason. Could they get him back on a deal for around $15 million? Or, does a team out there believe in Hachimura’s upside to an extent of $20+ million per year?
If the latter, the Lakers would be forced into an uncomfortable situation where they would need to either let Hachimura leave for nothing, or match an offer sheet where they pay him several million more than they think he’s worth.
Here’s a quick rule of thumb: NBA teams like to know what they have to deal with, especially financially. It makes a difference if a player suddenly swings up or down $5 million per year, to the point where potential plans could need to be altered.
As such, RFA is an element most teams should try to avoid, unless the player in question is clearly going to be worth a maximum contract.
Navigating RFA waters begin with understanding the fact that extending a player’s rookie contract should be preferable. Say the Wizards had locked up Hachimura to a set deal of four years and $64 million. The Wizards themselves might not love that deal, but they could begin to shop him after the contract activates on July 1, 2023.
Teams would then know what Hachimura’s compensation level would be for the next four years, and this gives them necessary insights as to optimize their own roster construction. There are no unforeseen contractual elements, nor will Hachimura’s salary suddenly jump due to outside interference, as it could via RFA where outside teams set the market value.
The clever teams, especially those good at long-term evaluation, will likely have pivoted away from a rookie contract player earlier, if they realize he’s not going to be worth their investment.
By trading away a player with two more years on their rookie contract, you’re tapping into the player’s perceived potential around the league, and optimizing trade value. Teams simply stand a better chance at getting a significantly bigger return by trading a player earlier in the four team-controlled years of the rookie contract.
Naturally, that too comes with risk, as players can make big leaps later in their careers. Famously, the Chicago Bulls decided Jimmy Butler wasn’t worth an extension of $50 million in 2014, but were forced to fork over almost twice that ($95 million) the following summer after he turned himself into a max contract player in his fourth season.
Going back to Washington, the Hachimura situation was ultimately poorly handled. The Wizards have not only had a clearly superior player in Kyle Kuzma in front of Hachimura for a year and a half, but they also have generally have had too deep a backcourt. They should have known that the writing was on the wall with Hachimura a while ago, and instead they shipped him off when his value was at his lowest, and received a return fitting of such circumstances.
Teams should use this situation as a cautionary tale in how to make quicker decisions regarding their upcoming restricted free agents.