Worried about issues found during a home inspection? Maybe you found termites, foundation issues, or leaky plumbing that would cost you thousands and wasn't disclosed before, but you're affraid of the consequences of cancelling the agreement or losing your deposit. Here's what California homebuyers need to know, especially if you're considering hiring a real estate attorney.

Understanding Your Right to Cancel a Real Estate Contract in California

Buying a home in California is a major legal and financial commitment. But what if the home inspection reveals serious problems—like foundation cracks, mold, or outdated electrical systems?

The good news: if your purchase agreement includes an inspection contingency, you likely have the right to cancel the deal and recover your earnest money deposit.

Even experienced buyers can feel pressure to move forward quickly, especially in fast-paced real estate markets like Los Angeles, San Diego, or the Bay Area. That's why it's important to understand your legal options before signing or canceling any agreement.

What Is an Inspection Contingency in California Real Estate?

An inspection contingency is a clause in your real estate purchase contract that gives buyers a period of time to inspect the home and decide whether to proceed with the purchase.

Typical issues that trigger cancellation include:

• Foundation settling or cracking
• Roof damage or leaks
• Electrical panels that are outdated or unsafe
• Unpermitted renovations or additions
• Health hazards such as mold, lead paint, or asbestos

This clause often gives buyers the sole discretion to determine whether the inspection results are acceptable. That means you may walk away—even if the problem is minor—as long as you follow the procedures outlined in the agreement.

How Long Do You Have to Cancel After a Home Inspection?

In California, the standard inspection contingency period ranges from 7 to 17 days after the seller accepts your offer. This is often referred to as the due diligence period. In deciding how long to have the contingency period open, think about how many inspectors you want to inspect the property, or if you think you would like a second opinion after having just one take a look at the property.

During this period, you are allowed to:

• Hire a licensed home inspector
• Order specialty inspections (roof, sewer, foundation, termite, etc.)
• Request repairs or credits from the seller
• Cancel the contract for any reason related to the inspection

Pro tip: Always keep a copy of the inspection report, and confirm the cancellation in writing using the delivery method stated in your contract (e.g., email, certified mail, or official cancellation forms). If you cancel correctly, your earnest money should be returned to you in full.

What Happens If There's No Inspection Contingency?

Waiving the inspection contingency is sometimes used as a competitive strategy in hot real estate markets. However, this strategy can backfire.

If you find major issues later—such as unsafe plumbing or pest infestations—you may not be able to cancel the deal without penalty. In some cases, you could lose thousands of dollars in earnest money or face litigation.

That's why it's critical to talk to your real estate agent or consult with a California real estate lawyer before agreeing to waive any contingencies.

In rare instances, you may still have a legal path forward. For example:

• If the seller failed to disclose a known issue
• If there was misrepresentation or fraud
• If a defect was actively concealed

A real estate attorney can help evaluate whether you have a valid claim for rescission or legal recourse.

Do I Need a Serious Reason to Cancel?

Not necessarily. Most California real estate contracts contain a subjective inspection contingency, meaning the buyer gets to decide whether the inspection results are acceptable.

Examples of legitimate—but non-structural—reasons buyers have used to cancel include:

• The home has an unpleasant odor
• Interior finishes were of lower quality than expected
• Discovery of unpermitted work that could be costly to fix
• Noisy neighbors or environmental concerns

However, some contracts do use objective language, which limits cancellation rights to specific types of defects (e.g., safety or structural issues). In those cases, you may need evidence from a qualified professional to back up your cancellation.

What If I Miss the Deadline?

Failing to cancel before the inspection contingency expires can be costly. If you miss the deadline and try to walk away:

• Your earnest money deposit could be forfeited
• The seller might claim you breached the contract
• You could be forced into arbitration or litigation

Make sure you:

• Know the exact deadline for inspections
• Keep written records of your communications
• Confirm that all cancellation notices are timely and properly delivered

Why Consult a California Real Estate Attorney?

A real estate attorney in California can help you:

• Understand your inspection and cancellation rights
• Review the terms of your purchase contract
• Ensure proper delivery of cancellation notices
• Negotiate with the seller over repairs or credits
• Avoid legal disputes over earnest money or breach of contract

Unlike real estate agents, attorneys can provide legal advice and represent your interests if the situation turns contentious.

Final Thoughts: Protect Your Investment and Know Your Rights

A home inspection isn't just a formality—it's your legal and practical opportunity to investigate the property. If you find something concerning, you may have the right to cancel and get your deposit back—but only if you act on time and according to your contract.

Don't leave your investment to chance. Whether you're a first-time homebuyer or a seasoned investor, consulting a real estate lawyer in California can give you peace of mind and help protect your rights.

Need Help Backing with a Real Estate Contract in California?

Call the Law Office of Steve Lopez at (562) 904-1193. We represent buyers and sellers across Southern California and can help you cancel a real estate deal properly—and protect your earnest money.