How Contingencies Actually Work in California Real Estate

No. Buyers do not automatically have to remove contingencies when the timeline expires.

Contingencies remain in place until one of two things happens:

• The buyer removes them in writing, or

• The seller issues a Notice to Perform

This is how the California Residential Purchase Agreement is written, not a loophole.

What Most Buyers Get Wrong

The contract says the buyer shall remove contingencies within a certain timeframe.

But what matters is what happens if they don’t.

- Nothing happens automatically.
- The contract is not self-executing.

The seller must take action by issuing a Notice to Perform, which forces the buyer to decide—either remove contingencies or risk cancellation.

When Can a Seller Force a Buyer to Remove Contingencies?

If the buyer does not remove contingencies, the seller can issue a:

Notice to Buyer to Perform (NBP)

This gives the buyer 2 business days to:

• Remove contingencies, or

• Cancel the contract

If the buyer does neither → seller can cancel.

How Is a Notice to Perform Deadline Calculated in California?

A 2-day Notice to Perform is generally calculated using calendar days—not 48 hours.

The deadline is typically 11:59 p.m. on the second day after delivery. If the final day falls on a weekend or legal holiday, the deadline extends to the next business day.

Example:
If the notice is delivered on Thursday:

• Day 1 = Friday

• Day 2 = Saturday

Because Saturday is not a business day, the deadline rolls to Monday at 11:59 p.m.

If Friday is a legal holiday, the deadline extends further to the next business day.

Bottom line: Think end of day, not exact hours, but always confirm based on the contract terms and method of delivery.

Can You Back Out After Inspections?

Yes, but only under one condition: Your inspection contingency is still active

While active, the contract allows the buyer to:

• Cancel for any reason

• Request repairs or credits

• Continue negotiating

Once removed → that protection is gone.

Do Repairs or Credits Lock You Into the Deal?

No but this is where buyers get into trouble.

• A seller agreeing to repairs or credits does NOT remove contingencies

• It also does NOT automatically bind the buyer

However:

-If you accept and remove contingencies, you are now committed

-If you cancel after that without a valid contingency, you risk:

• Losing your deposit

• Being in breach of contract

The Only Way Contingencies Are Actually Removed in California (What Most Buyers Get Wrong)

Contingencies are NOT removed by:

• Time passing

• Verbal agreements

• Repair negotiations

• Seller concessions

They are only removed by:

A signed Contingency Removal (CR)

What Happens If You Don’t Remove Contingencies?

Nothing, until the seller acts.

• Your protections remain in place

• You can still cancel based on contingencies

Until: Seller issues a Notice to Perform
You fail to respond within 2 days

Can a Seller Force You to Remove Contingencies?

No.

They can only:

• Issue a Notice to Perform

• Force a decision, not the outcome

What Happens If the Appraisal Comes in Low?

If contingency is still active:

✔ You can renegotiate
✔ You can cancel

You must:

• Bring in the difference, or

• Risk losing your deposit

If a property is under contract at $2,000,000 but appraises at $1,900,000, the lender will base the loan on the lower value. The buyer must either renegotiate the price, bring in the $100,000 difference in cash, or cancel the contract—if the loan contingency is still in place.

Can You Cancel Right Before Closing?

Only if a contingency is still active

If all contingencies are removed:

• You are contractually committed

• Cancellation may result in loss of deposit and litigations

What Are the Biggest Mistakes Buyers Make?

Removing contingencies too early. Driven by pressure rather than readiness, and often the result of not fully understanding the contract or working with inexperienced guidance

Believing deadlines are automatic

They are not self-executing

Thinking repairs lock them in

They don’t, until contingencies are removed

Not understanding Notice to Perform

This is what actually forces action

Giving up leverage too soon

Contingencies = your negotiating power

What Is the Smart Strategy?

A strong buyer does not rush.

They:

• Complete inspections

• Review all disclosures

• Analyze title, reports, and risks

• Negotiate repairs or credits

Then: Remove contingencies strategically
Wait until the seller issues a Notice to Perform

When Does a Buyer Lose the Right to Cancel in California?

A buyer does not lose the ability to cancel simply because:

• Repairs were negotiated

• Credits were offered

• The contingency period expired

Those events do not remove contingencies.

The buyer only becomes fully committed when:

• Contingencies are removed in writing

Until that happens, the buyer retains contractual protection.

What Happens After You Remove Contingencies in California?

Once contingencies are removed:

• You accept the property condition

• You accept the disclosures as sufficient

• You assume the risk of unknown issues

• You significantly limit your ability to cancel

This is not procedural, it is a legal shift in liability from the seller to the buyer.

What Risk Do You Take When You Remove Contingencies?

Once contingencies are removed:

• The property is accepted as-is

• Disclosures are deemed sufficient

• The buyer assumes full risk

• The ability to cancel is largely gone

This is not just a step in the process—it is the moment the risk transfers to the buyer.

What Do You Lose When You Remove Contingencies - And Can You Still Cancel?

Removing contingencies is the most significant legal step in a real estate contract.

Once you remove your contingencies:

• You are committing to the purchase

• Your ability to cancel is severely limited

• Your deposit is at risk

If you attempt to cancel after removing contingencies, you may:

• Lose your deposit

• Face a dispute over liquidated damages

• Be pulled into mediation, arbitration, or litigation

In most cases, the seller will claim your deposit as damages, and recovering it can be difficult.

Can New Disclosures Reopen Contingencies in California?

Not automatically—but they can create new rights.

If a seller delivers new, material information after contingencies have been removed, the buyer may have the right to:

• Review the new information

• Renegotiate the terms

• Potentially cancel the contract

This is based on the principle in the RPA that the buyer must have a fair opportunity to investigate all material facts affecting the property.

What Happens If the Seller Discloses Something Important After Contingency Removal?

If the seller provides new material information late, the issue becomes timing.

The buyer removed contingencies without having all the facts.

In that situation, the buyer may argue:

• The investigation was incomplete

• The decision to remove contingencies was made without full disclosure

This can justify:

• A request for additional time

• Renegotiation

• Or cancellation, depending on the severity of the issue

What Qualifies as a “New Material Fact”?

Not everything qualifies.

For the buyer to have protection, the information must be:

• Previously undisclosed

• Material (affects value, desirability, or use)

• Significant enough to impact the buyer’s decision

Examples may include:

• Structural or foundation issues

• Permitting problems

• Environmental hazards

• Title or legal issues affecting use

Minor updates or already-known issues generally do not apply.

Can a Buyer Cancel Based on Late Disclosures?

Possibly—but it depends on the facts.

If the new information is material and should have been disclosed earlier, the buyer may have grounds to cancel—even after contingencies were removed.

However:

• This is not automatic

• It may lead to a dispute

• The seller may challenge the cancellation

In many cases, this becomes a negotiation—or a legal question.

What Is the Key Contract Principle?

The buyer’s removal of contingencies assumes that: All material information has been disclosed

If that assumption is no longer true, the buyer may have the right to reassess the transaction.

Contingencies don’t automatically reopen, but late, material disclosures can change the buyer’s rights.

CONCLUSION

Contingencies Control Risk, Not the Timeline

In California real estate, contingencies do not disappear because time passes.

They remain in place until one of two things happens:

• The buyer removes them in writing

• The seller forces a decision through a Notice to Perform

Everything else, deadlines, repairs, negotiations, is secondary.

Once contingencies are removed, the transaction fundamentally changes:

• The buyer accepts the property and disclosures

• The buyer assumes the risk

• The ability to cancel is largely gone

And while late, material disclosures can create new rights, they do not automatically restore protection. The key is not speed, it is understanding when risk shifts.

Work With Someone Who Understands the Contract Not Just the Process

Most issues in real estate transactions are not about the property—they are about timing, leverage, and contract interpretation.

If you are buying or selling in Santa Monica or Los Angeles and want clarity on:

• Contingency strategy

• Notice to Perform timing

• Appraisal risk

• Disclosure obligations

• Negotiation positioning

Reach out directly: The difference between a smooth closing and a failed escrow often comes down to how these details are handled.