Contingency Removal in California: What LA Buyers Need to Know

What is active contingency removal in California?

In California, contingency removal is an active process: the buyer must sign a written Contingency Removal form to lift each protection. If a contingency deadline passes without a signed form, the contingency stays legally in force. This differs from states where protections expire automatically at the deadline. In Los Angeles, the default contingency period is 17 days from acceptance, and removing contingencies puts your deposit at risk of forfeiture if you later cancel.

By Paul Blair | September 9, 2026

You've found the house. Your offer was accepted. Now your agent is telling you there's a contingency removal deadline coming up, and you need to decide whether to sign.

A lot of buyers in Los Angeles get to this moment without fully understanding what they're giving up. This post explains how contingency removal works in California, why it matters more here than in most other states, and what you should know before you put your deposit on the line.

California Uses Active Removal, Not Passive Expiration

In most real estate transactions, there are contingencies built into the contract. These give you the legal right to cancel and get your deposit back if certain conditions aren't met: the inspection turns up something serious, the property doesn't appraise, your loan doesn't fund.

What makes California different is how those protections go away.

In some states, a contingency expires automatically once the deadline passes. You don't have to do anything. In California, the system works the opposite way: your contingencies remain in place until you actively remove them in writing. The buyer, typically in coordination with their agent, signs a Contingency Removal form using the standard CAR (California Association of Realtors) documents. Only once that form is signed does the protection lift.

This matters a lot. It means that if the deadline passes and no one takes action, your contingencies stay in place. But it also means that once you do sign that form, you've made a deliberate, documented decision to surrender your right to cancel without financial penalty.

The 17-Day Default Window

Under the California Residential Purchase Agreement, the default contingency period is 17 days from acceptance. That applies to the investigation contingency (inspection), the loan contingency, and the appraisal contingency, though each can be negotiated to a different timeline.

In practice, 17 days goes fast. Your inspector needs to schedule and complete the report. Your lender needs to work through the loan process. The appraiser needs to get out to the property. In a competitive Los Angeles market, particularly in neighborhoods like Beverly Hills, Bel Air, or the Hollywood Hills, sellers often push for shorter timelines.

If the seller wants to move faster than the buyer is ready to, they can issue a Notice to Perform asking the buyer to remove contingencies or cancel within two business days. We've covered how the Notice to Perform process works in California in detail if you want to understand that piece of the process.

What Happens to Your Deposit After Removal

This is the part that surprises buyers most.

Under California Civil Code Section 1675, when you sign the Contingency Removal form and then later decide to cancel, the seller has the right to keep your deposit as liquidated damages, up to 3% of the purchase price. That cap applies to owner-occupied properties of one to four units when both parties have initialed the liquidated damages clause. In most California transactions, that clause is standard.

At the Los Angeles County median sold price of $838,350 (as of May 2026), a 3% deposit comes to approximately $25,151. For buyers purchasing in the $2M to $5M range common across the Westside and the Hollywood Hills, the exposure is considerably higher.

Before contingency removal: if you cancel in writing while any contingency is still active, you get your full deposit back. After removal: that protection is gone.

For a full breakdown of how deposits work before you get to this stage, our guide to earnest money in California for Los Angeles buyers covers the mechanics in detail.

The Three Contingencies You'll Be Asked to Remove

Investigation contingency (inspection). This is your right to inspect the property and cancel based on what you find. Removing it means accepting the property in its current condition. In competitive situations, some buyers waive this contingency at the time of offer. That's a high-stakes move and one worth thinking through carefully with your agent before committing to it.

Loan contingency. This protects you if your financing falls through. Removing it means that even if your lender denies the loan after this point, you can't cancel and keep your deposit. Most buyers keep this contingency active until they have a clear-to-close from their lender.

Appraisal contingency. This protects you if the property appraises below the purchase price. In LA's luxury segment, properties regularly sell above asking, and appraisals sometimes come in lower. If you've removed the appraisal contingency, you're on the hook to make up any gap between the appraised value and the purchase price out of pocket, or to close at the higher price and absorb the shortfall.

Ready to talk through where you stand in your transaction? Get in touch with the Grey Square team and I'll walk you through the contingency timeline for your specific situation.

A Few Things LA Buyers Often Miss

Insurance comes before removal, not after. In high-fire-risk areas, including parts of Pacific Palisades, the Hollywood Hills, Topanga, and Malibu, confirming that you can get homeowners insurance at a reasonable cost before removing contingencies is critical. Finding out that the only available policy is prohibitively expensive after you've gone non-refundable is a costly mistake. Request quotes during your inspection period, not after you've signed the removal form.

Soils reports for hillside properties. Buyers purchasing on a hillside or canyon property in Beverly Hills, Bel Air, or the Hollywood Hills often need a geotechnical soils report as part of the investigation period. These reports evaluate retaining walls, drainage, and slope stability. A full hillside soils report can run $15,000 to $40,000 depending on the scope of analysis, and the findings can be material. Removing your investigation contingency before this work is complete means you lose your ability to cancel based on what it turns up.

Each contingency can be removed separately. You don't have to remove all of them at once. In many transactions, buyers remove the investigation contingency after their inspection and repair negotiations are complete, but keep the loan contingency active until the lender issues a final approval. Your agent should be tracking these individually, not treating them as a single event.

For a broader look at what you're agreeing to from the moment you sign, our overview of the California Residential Purchase Agreement for Los Angeles buyers covers the key contract provisions from offer through close.

Frequently Asked Questions

What is the difference between active and passive contingency removal in California?

Active contingency removal means the buyer must sign a written Contingency Removal form to lift each protection. If no form is signed, the contingency stays in place even after the deadline passes. Passive removal works the opposite way: the contingency expires automatically at the deadline with no action required from the buyer. California uses active removal under the standard CAR contract.

How long is the default contingency period in California?

The California Residential Purchase Agreement sets a default contingency period of 17 days from the date of acceptance. This applies to the investigation, loan, and appraisal contingencies, though each can be negotiated to a shorter or longer window depending on the deal.

Can I get my deposit back after removing contingencies in California?

Once you've signed the Contingency Removal form, your deposit is generally at risk if you cancel. The seller can keep up to 3% of the purchase price as liquidated damages for an owner-occupied one-to-four-unit property when the standard liquidated damages clause has been initialed by both parties. Before removal, a written cancellation while any contingency is still active gets you a full refund.

What happens if the seller issues a Notice to Perform?

A Notice to Perform gives you two business days to either remove contingencies or cancel the transaction. If you don't respond, the seller can cancel the contract. Receiving one is a sign the seller wants to push things forward, and how you respond should depend on where your loan approval and inspection results actually stand.

Do I have to remove all contingencies at the same time?

No. Each contingency can be removed individually. Many buyers remove the investigation contingency after completing their inspection and resolving any repair requests, then keep the loan and appraisal contingencies active until the lender issues a clear-to-close. Your agent should be tracking each one separately and advising on timing based on where you actually are in the process.

Know What You're Signing Before You Sign It

Contingency removal is one of the most consequential moments in a California real estate transaction. It's not just paperwork. It's the point where your deposit becomes the seller's if the deal falls apart.

The 17-day default window moves quickly, especially in a competitive LA market. Making sure your inspection is complete, your insurance situation is confirmed, and your lender is on track before you remove anything is the right approach. Removing contingencies before you have answers to those questions is where buyers get into trouble.

If you're navigating this right now, reach out to Grey Square and I'll give you a clear picture of where things stand and what to do next.

About Paul Blair

Paul Blair is the founder and broker of Grey Square, a virtual real estate brokerage representing buyers and sellers across Dallas and Los Angeles. With 22 years in the business and more than $200 million in closed transactions, Paul works the full range of the market, from luxury homes in the Park Cities and Preston Hollow to estates in the Hollywood Hills and across the Westside. Connect with Paul and the Grey Square team at greysq.com. TX TREC #9011505 · CA DRE #01792671.