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What are qualifying offers and how do they work?

Everything you need to know about them as the baseball offseason gets going.

Washington Nationals v Colorado Rockies Photo by Dustin Bradford/Getty Images

Qualifying offers have been around for over half a decade now, so most fans are familiar with the general process — or at the very least have gotten used to the term being thrown around and know it has something or other to do with compensation for players leaving a team in free agency.

What is a qualifying offer?

If teams want to receive compensation if one of their free agents signs with another team, they have to extend a qualifying offer first. It’s a one-year offer, for a set amount, that players can accept or reject based on their expected chances in free agency. Compensatory picks are handed out based on the previous season’s standings, just like normal draft picks.

How much is the 2018 season’s qualifying offer?

The qualifying offer amount is the average salary of the league’s top 125-paid players. This year’s amount is confirmed to be $17.9 million, up $500,000 from the 2017 offseason.

Who is eligible for qualifying offers?

Players must have been with a team for an entire season to be able to receive a qualifying offer. New with this CBA, players also can’t have received a qualifying offer before either.

When can teams start extending qualifying offers to players?

Teams have five days after the World Series ends to extend qualifying offers to any impending free agents they want to receive compensation for should they go somewhere else. In 2018, the deadline is Monday, November 2nd at 5 p.m. ET.

How long do players have to decide whether to accept?

After the teams extend offers, players have 10 days to decide on whether to accept or decline the offer. They can negotiate with other teams during this period as well, so that they have as much information as possible about their free agency value before making the decision. The deadline this year is November 12th at 5 p.m.

What do teams give up if they sign someone who rejected a qualifying elsewhere?

Put simply, one or more draft picks. All picks are eligible to be taken away, except for a team’s highest draft pick. In the newest CBA, what picks are given up depend on two categories: the luxury tax and revenue sharing. From MLB’s qualifying offer rundown:

  • If a team went over the luxury tax the season before, it loses its second- and fifth-highest picks in the next year’s draft. It also loses $1 million from its international bonus pool money. If these teams sign more than one free agent that declined a qualifying offer, it loses its third- and sixth-highest draft picks on top of that.
  • If a team receives revenue sharing, it loses its third-highest pick. The fourth-highest pick gets tacked on if it signs more than one free agent that declined a qualifying offer.
  • If a team doesn’t receive revenue sharing or exceed the luxury tax, it loses its second-highest pick and $500,000 from its international bonus pool money. Another player, and it gives up its third-highest pick as well.

For reference, the only teams coughing up the luxury tax this year were the Dodgers, Yankees, Red Sox, Tigers, and Nationals.

What do teams get if a player declines a qualifying offer and signs somewhere else?

Put simply, they get a compensatory draft pick. But in the same way as what teams give up, what teams get all depends on the numbers.

  • If the free agent signs an offer worth more than $50 million of total value AND the team he came from receives revenue sharing, that team will get a compensatory draft pick after the first round ends. If a team receives revenue sharing but the deal is worth less than $50 million, that picks comes after Competitive Balance Round B (which occurs directly after the second round).
  • If the team that loses a free agent after extending a qualifying offer pays the luxury tax, their compensation pick will come after the fourth round is over. If they didn’t, and also didn’t receive revenue sharing, that pick will come after Competitive Balance Round B.