Lin has signed an offer sheet with Houston, according to a person with direct knowledge of the move. The person spoke to The Associated Press on Friday night on condition of anonymity because the agreement with the New York Knicks' restricted free agent point guard wasn't announced.
Another person familiar with the negotiations said it is a three-year deal worth about $25 million. The person, who spoke on condition of anonymity because the terms hadn't been announced, said the third year is worth about $15 million.
New York has three days to match Houston's offer, and coach Mike Woodson said this week that Lin would "absolutely" return. The Knicks signed 39-year-old Jason Kidd in free agency, and Kidd said he is looking forward to mentoring Lin, whom Woodson said will be the starter entering training camp.
The 6-foot-3 Lin was briefly in Rockets training camp before the season began. Houston waived him because the Rockets already had Kyle Lowry and Goran Dragic on their roster.
The Knicks claimed Lin off waivers, and he became an overnight sensation during a remarkable run in February. He averaged 14.6 points and 6.2 assists in 35 games before his season ended because of torn cartilage in his left knee.
Earlier Friday, the Rockets waived Luis Scola via the amnesty clause. The one-time use of amnesty allows Scola to leave without his remaining contract counting against the team's salary cap or luxury tax. Scola is due to make about $21 million over the next three seasons.
A fan favourite in Houston, the 6-foot-9 Scola averaged 14.5 points and 7.7 rebounds in five seasons with the Rockets. Scola grabbed 2,984 rebounds with the Rockets to rank ninth on the team's career list.
The Rockets have torn apart last season's roster as they try for a deal that would pry All-Star centre Dwight Howard away from the Orlando Magic. Cutting Scola allows Houston to absorb multiple undesirable contracts from Orlando in a potential deal.
Houston has been the most active team in the off-season, collecting assets and draft picks to build a package enticing enough to convince the Magic to trade Howard, a six-time All-Star and three-time defensive player of the year. The Rockets have needed a dependable big man since former top overall pick Yao Ming started getting leg and foot injuries that eventually led to his retirement last summer.
Rockets general manager Daryl Morey has also spent years trying to land a top-tier superstar who he envisions as the cornerstone of a championship-calibre team. The Rockets were close to getting Pau Gasol before last season in a proposed deal that also would have sent All-Star guard Chris Paul to the Lakers. But NBA Commissioner David Stern, acting on behalf of the league-owned New Orleans Hornets, vetoed the deal that would have brought Lamar Odom to the Hornets, along with Scola, Kevin Martin, Dragic and a first-round pick.
On Tuesday, the Rockets completed a trade of Lowry to Toronto for a lottery-protected, first-round pick and a sign-and-trade deal that sent Marcus Camby to New York for two future second-round picks and three other players.
Before the draft, Houston traded forward Chase Budinger and centre Samuel Dalembert in separate deals that netted two first-round picks. The Rockets were reportedly shopping the picks to move up in the draft, but eventually stayed put and used their three first-round draft picks on Connecticut guard Jeremy Lamb, Iowa State forward Royce White, and Kentucky forward Terrence Jones.
Houston also is expected to sign Bulls centre Omer Asik to an offer sheet. Earlier in free agency, Asik agreed to a three-year, $25 million offer.
The Rockets turned back to Lin after the unrestricted free agent Dragic signed a four-year, $30 million deal with Phoenix.
The 7-foot Asik was playing professionally in Turkey when he was picked by Portland in the second round of the 2008 draft and immediately traded to Chicago in a three-team deal. He played in 66 games last season, but only averaged 3.1 points, 5.3 rebounds and one block per game. Asik helped Turkey earn the silver medal at the 2010 FIBA world championship.
AP Basketball Writer Brian Mahoney contributed to this report.