The California residential purchase agreement: the buyer's rights to cancel, the deposit, and escrow
State law sets rules for a California purchase agreement: how it is signed, what it contains, when the buyer may cancel it after a late disclosure, how a deposit can become liquidated damages, and how escrow funds go back when the purchase does not close. This page covers those rules, and title and closing too. It does not cover the contingency periods, how a contingency is removed, or the notice to perform: read them in the contract itself. Every fact comes from a California statute, a DRE regulation or publication, the California Department of Insurance, or the EPA, and links to its source.
Every fact links to its source. Checked Oct 3, 2026
The written agreement and what goes on it
An agreement to sell real property is invalid unless the agreement, or a note or memorandum of it, is in writing and signed by the party to be charged. When an agent signs for that party, the agent's authority must also be in writing and signed by that party. (Source: California Legislative Information)
The responsible broker exercises reasonable supervision over its salespersons and broker associates. This includes policies, rules, procedures, and systems to review and manage licensed transactions and the documents that can affect a party's rights or obligations, and the filing and storage of those documents. Associate brokers and salespersons may help, but the broker keeps overall responsibility (10 CCR 2725). (Source: California DRE)
You put your name, your license identification number, and your responsible broker's identity on purchase agreements. The same rule applies to all solicitation materials meant to be the first point of contact with consumers. (Source: California Legislative Information)
As soon as practicable, the buyer's agent tells the buyer and the seller whether the agent acts for the buyer only or as a dual agent. The purchase contract, or a separate writing signed or acknowledged before or with the contract, confirms the relationship in the form the statute sets. (Source: California Legislative Information)
Every contract for the sale of residential property of one to four units contains, in at least 8-point type, the statutory Megan's Law notice that information about registered sex offenders is on the Department of Justice website at www.meganslaw.ca.gov. After the notice is delivered, the seller and the broker need not give more information about how near registered sex offenders live. (Source: California Legislative Information)
Contingencies and the buyer's rights to cancel
If the seller delivers the Transfer Disclosure Statement (TDS), or a material amendment to it, after the execution of an offer to purchase, the buyer may terminate the offer by written notice to the seller or the seller's agent. The buyer has 3 days after delivery in person, or 5 days after delivery by mail or, when the parties agreed to deal electronically, by electronic record. (Source: California Legislative Information)
That period starts when Sections I and II of the TDS, and Section III when the seller has an agent, are completed and delivered to the buyer or the buyer's agent. (Source: California Legislative Information)
The buyer has the same right for the Natural Hazard Disclosure Statement (NHD): if it, or a material amendment, is delivered after the execution of an offer, the buyer has 3 days after delivery in person, or 5 days after delivery by mail or, when the parties agreed to deal electronically, by electronic record, to terminate the offer by written notice to the seller or the seller's agent. (Source: California Legislative Information)
For a property with a Mello-Roos special tax, the local agency's designated office gives a "Notice of Special Tax" within 5 working days of a request, for a fee of no more than $15, so that the seller can meet the disclosure duty of Civil Code 1102.6b. The notice tells the buyer that the purchase contract can be terminated, by written notice to the owner or the selling agent, within 3 days if the notice was received in person, or within 5 days after it was mailed. (Source: California Legislative Information)
Before a buyer is bound under a contract to buy housing built before 1978, the seller gives the buyer 10 days to have a lead-based paint inspection or risk assessment, unless the parties agree in writing on another period. The buyer may waive it in writing. The federal rule excepts housing for the elderly or persons with disabilities and 0-bedroom units, unless a child under 6 lives or is expected to live there. (Source: EPA)
The deposit and the liquidated damages clause
The broker places funds received for another person with their owner, a neutral escrow depository, or the broker's trust fund account no later than 3 business days after the broker or the salesperson receives them (10 CCR 2832). (Source: California DRE)
A buyer's check may stay uncashed until the offer is accepted when two things are true: the check is not negotiable by the broker, or the buyer instructed in writing not to deposit it before acceptance; and the seller is told before or when the offer is presented. The check is then placed within 3 business days after acceptance, unless the seller authorizes in writing that the broker keep holding it. (Source: California DRE)
For a home of up to 4 units that the buyer, when the contract is made, intends to live in, a clause that lets the seller keep the buyer's payment as liquidated damages when the buyer fails to complete the purchase is valid only to the extent the buyer actually paid it by cash or check, and only if it meets Civil Code 1677 and 1678. (Source: California Legislative Information)
For that home, an amount actually paid of 3% of the purchase price or less is valid unless the buyer shows it is unreasonable as liquidated damages. An amount above 3% is invalid unless the party who wants to keep the clause shows it is reasonable. (Source: California Legislative Information)
A liquidated damages clause in a contract to buy real property is invalid unless each party signs or initials it separately. In a printed contract, it is in at least 10-point bold type, or in contrasting red print in at least 8-point bold type. (Source: California Legislative Information)
When a later payment, such as an increased deposit, is also to count as liquidated damages, it counts only if the total still meets Civil Code 1675 and each party separately signs or initials a new liquidated damages clause for that payment. (Source: California Legislative Information)
Escrow, title, and closing
For a property of 1 to 4 units where the buyer will live in one unit, the buyer and the seller must make sure escrow funds go back to the person who deposited them, or to the person the contract entitles, when the purchase does not close by the contract's closing date or an extension. A party who does not sign the escrow holder's release within 30 days after the other party's written demand is liable for the funds not held for a good faith dispute, damages of 3 times those funds (at least $100 and no more than $1,000), and reasonable attorney's fees. (Source: California Legislative Information)
There is no liability under that rule when a party holds the funds to resolve a good faith dispute. Signing the escrow holder's release, or taking the released funds, does not cancel the purchase contract unless the document says so. (Source: California Legislative Information)
The California Department of Insurance says the party that pays the title premium is a matter of local custom and practice, not law, and the parties are free to negotiate. In Southern California, the seller customarily pays the premium for title insurance, and in almost every county the buyer pays the lender's policy premium. (Source: California Department of Insurance)
The Department says it is unlawful for a title insurer, underwritten title company, or controlled escrow company to charge less than its filed schedule, and unlawful to pay a commission to anyone for a referral or placement of title insurance. A lender, real estate broker, or home builder who gets free or discounted services or money for steering business to a title company receives an unlawful rebate. (Source: California Department of Insurance)
The DRE warns that criminals hack the email of real estate professionals or escrow officers and pose as them to get homebuyers to send money to fraudulent accounts. It tells buyers to verify payment instructions with a phone call to the escrow officer or real estate agent, especially for wire transfers, and to be careful with unsolicited emails that change payment instructions or come from slightly changed email domains. (Source: California DRE)
Not on this page
The contingency periods, how each contingency is removed, and the notice to perform: read the contract itself.
The deposit amount, the days to deliver it, and the liquidated damages clause of a given deal: read the contract itself.
The rule for the first sale of a new attached condo in a structure of 10 or more units (Civil Code 1675(f)): an attorney.
Whether the buyer may cancel, or get a deposit back, in a given case: an attorney.
What the TDS, the natural hazard disclosure, and the other seller disclosures say.
Trust account records, reconciliations, and the commingling exceptions (10 CCR 2831 to 2835): your responsible broker.
Who pays title, escrow, and other closing costs in a given deal: read the contract itself.
The title premium for a given price: the title company's filed rate schedule.
The escrow fee custom in your county: the escrow or title company.
