Free Agent Signings: Should You Sign Quickly or Hold Out for More?
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Whether a free agent is looking for a shorter term deal with high average annual value (AAV) or a longer term deal with a larger overall guarantee, should he be looking to sign a deal in November or December, early in the offseason, or should he wait until January or February, as spring training approaches?
There are two factors to consider here:
If a player holds out, teams that miss out on other free agents may become desperate for his services and his value could shoot up
If a player waits too long, teams may have their rosters set and limited payroll flexibility for further roster additions
In this analysis, I’ll look at the more than 1300 major league free agent signings - excluding extensions, minor league contracts, and any contracts for international players that are subject to posting fees - over the past 10 years to determine which of the two viewpoints carries more weight.
Figure 1 below shows the AAV in 2024 dollars (adjusted for inflation) versus the number of days after the start of the offseason when the contract was signed. From the figure, we see that signing early is generally better for free agents’ AAV. On average they lose $34,800 in AAV per day that they wait to sign.
Figure 1: AAV in 2024 US dollars (all contracts adjusted for inflation). The x-axis is the number of days after the start of the offseason when the contract was signed, and the y-axis is AAV in millions of dollars. Interest rate calculations use official annual inflation prints
Max Scherzer’s 2021 deal with the Mets has the highest AAV, inflation adjusted, of any contract in the past decade. Scherzer is followed by Justin Verlander and Shohei Ohtani in the elite group that has exceeded $45m AAV in 2024 dollars. Zack Greinke, Aaron Judge, Gerrit Cole, Anthony Rendon, and Steven Strasburg each have inked deals north of $40m AAV in 2024 dollars. All of these top eight AAV contracts were signed within the first 50 days of free agency.
Figure 2 below shows the total contract value in 2024 dollars (adjusted for inflation) versus the number of days after the start of the offseason when the contract was signed. Here, we see that signing early is also favorable for the total contract value, as six of the top eight contracts, all exceeding $300m in 2024 dollars, were signed within the first 50 days of free agency.
Figure 2: Total contract value in 2024 US dollars (all contracts adjusted for inflation). The x-axis is the number of days after the start of the offseason when the contract was signed, and the y-axis is total contract value in millions of dollars. Interest rate calculations use official annual inflation prints
Ohtani’s megadeal with the Dodgers this offseason tops this list, and is followed by Bryce Harper’s 2019 deal with the Phillies, Aaron Judge’s 2022 deal with the Yankees, Gerrit Cole’s 2019 deal with the Yankees, Corey Seager’s 2021 deal with the Rangers, Manny Machado’s 2019 deal with the Padres, Trea Turner’s 2022 deal with the Phillies, and Xander Bogaerts’ 2022 deal with the Padres. Contract value reduces by $139,200, on average, for each additional day that a free agent waits to sign.
Conclusion
Whether it’s a superstar looking for a mega deal, a first-time free agent aiming for long-term security, or an aging veteran attempting to secure a short-term deal, an aggressive approach to free agency will likely yield the highest AAV and total contract value.
