Contingencies in California Real Estate
Understand the three main contingencies — loan, appraisal, and inspection — how they protect buyers, and what it means to remove them.
What Are Contingencies?
Last updated: August 2026
Contingencies are conditions built into a real estate purchase agreement that protect the buyer. They give the buyer the right to cancel the contract — and recover their earnest money — if certain conditions are not met within specified timeframes.
In California, the three primary contingencies are the loan contingency, the appraisal contingency, and the inspection contingency. Each one protects the buyer in a different way and has its own timeline for removal.
Important: Contingency timelines and rules can be negotiated as part of the purchase agreement. This guide provides a general overview of California real estate contingencies. Always review your contract carefully and consult your Realtor for guidance specific to your transaction.
The Three Main Contingencies
Loan Contingency
Protects the buyer if they cannot obtain financing. If the loan is not approved within the timeframe, the buyer can cancel and recover their earnest money.
Appraisal Contingency
Protects the buyer if the property appraises below the purchase price. The buyer can renegotiate, cover the difference, or cancel the contract.
Inspection Contingency
Allows the buyer to inspect the property and request repairs, credits, or cancel based on findings. The default period is typically 17 days but is negotiable.
How Contingency Removal Works
Active Contingencies
After the contract is accepted, contingencies are active. The buyer has the right to inspect the property, secure financing, and verify the appraisal during this period.
Contingency Period Timelines
Each contingency has a timeline specified in the contract. The default inspection period in California is typically 17 days, but this is negotiable. The loan and appraisal timelines are also specified in the contract.
Removing Contingencies
Once the buyer is satisfied, they sign a contingency removal form. In California, contingencies must be actively removed in writing. The buyer is then committed to proceeding with the purchase.
Notice to Perform
If the buyer does not remove contingencies by the deadline, the seller may issue a Notice to Perform. This gives the buyer a final opportunity (typically 48 hours) to remove contingencies or the seller may have the right to cancel.
Frequently Asked Questions About Contingencies
What is a contingency in real estate?
A contingency is a condition in a purchase agreement that must be satisfied before the buyer is obligated to complete the purchase. If a contingency is not met, the buyer may have the right to cancel the contract and recover their earnest money deposit. The three main contingencies in California are the loan contingency, appraisal contingency, and inspection contingency.
What is the loan contingency?
The loan contingency protects the buyer if they are unable to obtain financing. If the buyer cannot secure a loan within the agreed-upon timeframe, they can cancel the contract and recover their earnest money. Once the loan contingency is removed, the buyer is committed to the purchase regardless of financing.
What is the appraisal contingency?
The appraisal contingency protects the buyer if the property appraises for less than the agreed purchase price. If the appraisal comes in low, the buyer can renegotiate the price, make up the difference in cash, or cancel the contract. Removing the appraisal contingency means the buyer proceeds even if the appraisal is low.
What is the inspection contingency?
The inspection contingency allows the buyer to have the property professionally inspected and request repairs, credits, or cancel the contract based on the findings. In California, the default inspection period is typically 17 days but can be negotiated. Buyers should complete all desired inspections before removing this contingency.
How are contingencies removed?
Contingencies are removed by signing a contingency removal form. In California, the buyer must actively remove contingencies in writing. If the buyer does not remove contingencies by the deadline, the seller may issue a Notice to Perform, which gives the buyer a final opportunity to comply before the seller can potentially cancel the contract.
Can I waive contingencies to make my offer stronger?
Waiving contingencies can make an offer more attractive in a competitive market, but it carries significant risk. Without a loan contingency, you could lose your earnest money if financing falls through. Without an inspection contingency, you're buying the property as-is. I help buyers understand the risks and make informed decisions based on their specific situation.
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