Contingency Removal in California: What It Means and What You Risk

By Matthew Martinez, Founder, CEO & Managing Broker, Diamond Real Estate Group. California DRE #01869679.

Removing a contingency in California means giving up, in writing, your right to cancel the purchase for that reason, such as the inspection, appraisal or loan. Once a contingency is removed, a buyer who backs out for that reason may lose the deposit, and if the contract has a signed liquidated damages clause, the deposit is usually the seller’s main remedy. Remove each contingency only after you have the information or approval it was meant to protect.

This guide explains how removal works under the standard California purchase agreement, what happens when you miss a deadline, how notices to perform fit in, how the loan, appraisal and investigation contingencies differ, and what happens to the deposit if you cancel.

What a contingency removal is

A contingency is a condition in your purchase agreement that lets you cancel if it is not satisfied. The common ones are:

Investigation: inspections, disclosures, reports, HOA documents, insurance and title review.
Appraisal: the property appraises at or above the price (or an agreed amount).
Loan: you obtain the financing described in the contract.
Sale of your home: if the offer includes one.

In the California Association of REALTORS® purchase agreement, buyers typically remove contingencies in writing on a contingency removal form, and they can remove them one at a time or all at once. How a missed deadline is handled depends on the version of the form you signed, so read the paragraph on contingency timing with your agent. We do not list default day counts here, because they are negotiated in each offer and the forms are revised periodically. Plot your own dates with our contract deadline calculator and see the California escrow timeline.

Why the deposit is at risk after removal

Before you remove a contingency, cancelling for that reason generally lets you recover your deposit, less agreed costs. After you remove it, cancelling for that reason may put you in breach. Two rules shape how much is at stake:

Rule	What it says	Source
Liquidated damages, up to 3%	For a dwelling of one to four units the buyer intends to occupy, a deposit actually paid of 3% of the price or less is valid as liquidated damages unless the buyer shows it is unreasonable	Civil Code 1675(c)
Liquidated damages, over 3%	An amount actually paid above 3% is invalid as liquidated damages unless the party seeking to keep it shows it is reasonable	Civil Code 1675(d)
How reasonableness is judged	By circumstances when the contract was made, and by the price and terms of any resale within six months of the buyer’s default	Civil Code 1675(e)
Clause must be initialed	Void unless separately signed or initialed by each party, and in a printed form set in at least 10-point bold or 8-point bold red type	Civil Code 1677
Increased deposits	A later deposit counts as liquidated damages only if the total still meets 1675 and the parties separately initial a clause for that payment	Civil Code 1678
Releasing escrow funds	A party who fails to sign release instructions within 30 days of a written demand, without a good-faith dispute, can owe the deposit, treble damages of $100 to $1,000, and attorney’s fees	Civil Code 1057.3

Section 1675 applies only where the buyer intends to occupy a home of up to four units. Investment purchases and larger properties follow general contract rules, so get legal advice. Our earnest money deposit guide covers how deposits are held and released.

Notices to perform

If a contingency deadline passes and you have neither removed it nor cancelled, the seller generally cannot cancel right away under the C.A.R. form. Instead, the seller sends a notice to perform giving you a short window to remove the contingency or cancel. If you do neither, the seller may then cancel. Buyers can also use a notice to perform when the seller misses an obligation, such as delivering disclosures. See our notice to perform guide for how the notice works and how long the window is in the current form.

Investigation and inspection contingency

Use the investigation period to finish every inspection and review that matters to you: general home inspection, pest report, roof, sewer lateral, septic or well, HOA documents, insurance quotes and the preliminary title report. Our home inspection guide covers what to order. If you want the seller to fix or credit items, make a request for repair before the deadline. A request is not a removal, so keep track of the deadline while you negotiate.

Disclosures interact with this period. Under Civil Code 1102.3, if the seller’s Transfer Disclosure Statement, or a material amendment, is delivered after you make your offer, you may terminate by written notice to the seller or seller’s agent within 3 days after delivery in person, or 5 days after delivery by mail or electronically. Our guide to California seller disclosures lists the rest of the package.

Appraisal contingency

The appraisal contingency protects you if the appraisal comes in below the price. Remove it after the appraisal is in and you know whether you can cover any gap. If you are financing, the appraisal and loan contingencies are separate and may have different deadlines. Our appraisal contingency guide covers low-appraisal options.

Loan contingency

The loan contingency lets you cancel if you cannot obtain the financing described in the contract. A preapproval letter is not loan approval, so ask your lender in writing what conditions remain before you remove it. Removing the loan contingency while the lender still needs documents, an appraisal review or underwriting sign-off is one of the most common ways buyers put a deposit at risk. Our loan contingency guide explains what to confirm.

A removal checklist

Before you sign each removal, confirm:

Inspections are complete and you have read every report, not just the summary.
Repair negotiations are settled in writing, or you accept the property as it is.
Disclosures and reports are all delivered and signed, including HOA documents if any.
Insurance is available at a cost you can accept.
The appraisal is in, and any gap is resolved.
Your lender confirms in writing the conditions remaining on your loan.
Your agent has checked the dates against the signed contract and any extensions.

If you need more time, ask the seller for a written extension before the deadline. A seller does not have to agree.

What happens if a buyer cancels

If you cancel within a contingency period, using the method the contract requires, you are generally entitled to the deposit back, less any agreed fees. Both parties then sign mutual cancellation and release instructions for escrow. If one side refuses to sign within 30 days after a written demand, without a good-faith dispute, Civil Code 1057.3 lets the depositor recover the amount plus treble damages within the statute’s limits and attorney’s fees.

If you cancel after removing contingencies, or for a reason the contract does not allow, the seller may claim the deposit. With a valid, initialed liquidated damages clause, the deposit is usually the limit of what the seller can recover. Without one, the seller may seek actual damages. Disputes often go to mediation first under the purchase agreement. Read our guide to cancelling a home purchase in California before you send any notice.

Removal as a negotiating tool

In competitive markets, some buyers shorten contingency periods or remove contingencies with the offer. That can make an offer stronger, but it moves the risk onto you. If you are thinking about it, gather what you can before you write, such as seller disclosures, prior inspection reports and a fully underwritten loan approval. Our guide on how to make an offer explains how contingencies fit into the rest of your terms.

Questions people ask

What does it mean to remove contingencies?

It means signing a written statement that you no longer rely on a specific contingency, such as inspection, appraisal or loan, to cancel the purchase. After removal, cancelling for that reason may cost you the deposit.

Can I get my deposit back after removing contingencies?

Generally not if you cancel for a reason you have already removed, unless the seller agrees or another contract right applies. If a valid liquidated damages clause was initialed, the deposit is usually the seller’s main remedy.

Is the 3% liquidated damages limit a hard cap?

Under Civil Code 1675, for owner-occupied homes of one to four units, an amount up to 3% is presumed valid, and anything above 3% is invalid unless shown to be reasonable. It applies only to amounts actually paid and requires a separately initialed clause.

What if my contingency deadline passes and I do nothing?

Under the C.A.R. purchase agreement, the seller typically must first send a notice to perform before cancelling. Do not rely on that; check the version of the form you signed and act before the deadline.

Can I remove some contingencies and keep others?

Yes. Buyers often remove the investigation contingency first and the loan contingency last. Each removal should list exactly which contingency you are removing.

Can I cancel if disclosures arrive late?

Under Civil Code 1102.3, if the Transfer Disclosure Statement or a material amendment arrives after your offer, you may terminate within 3 days of in-person delivery or 5 days after mailed or electronic delivery, by written notice.

What happens to the deposit if the seller will not sign the release?

Civil Code 1057.3 allows the depositor to recover the deposit plus treble damages of at least $100 and up to $1,000, and attorney’s fees, if the seller fails to sign within 30 days of a written demand without a good-faith dispute.

Sources & notes

Civil Code 1675: liquidated damages for owner-occupied one-to-four-unit homes; 3% presumption; reasonableness factors.
Civil Code 1677 and 1678: separately initialed clause, type size, later deposits.
Civil Code 1057.3: release of escrow deposits; 30-day demand; treble damages of $100 to $1,000; attorney’s fees.
Civil Code 1102.3: Transfer Disclosure Statement delivery and buyer’s 3- or 5-day termination right.

Statute text was reviewed through a public mirror of the California codes; confirm current wording on leginfo.legislature.ca.gov. Contingency removal procedures and default deadlines come from the C.A.R. residential purchase agreement, which is available to members and revised periodically; this page describes them generally and does not list day counts. Read the version you sign.

General information, not legal, tax or lending advice. Updated November 2026. Primary sources are linked in this guide.

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