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The earnest money typically goes towards the buyer's down payment or closing costs. It is refunded to the buyer only upon certain contingencies specified in the contract. If the buyer cancels the contract outside of the contingencies, it is released to the seller.

The cancellation provisions are found in Paragraphs 14C (1) and (2), and in Paragraph 14E of the CA-RPA. Regardless of the reason, the seller must give some type of notice to the buyer, however (either a Notice to Perform or a Demand to Close Escrow) before the seller can cancel.

The statute of limitations for negligence in California is generally 2-years, Code of Civil Procedure § 339. However, when there is damage or injury to real property, one would proceed under the 3-year statute of limitations in § 338(b) or the 3-year limitations period for fraud under § 338(d).

The Transfer Disclosure Statement (TDS) is required in the state of California unless the seller (or transferor) meets one of the following conditions: Court-ordered sales such as probate sales, foreclosure sales, sale by bankruptcy trustee, eminent domain.

A failure to disclose material information concerning real estate is considered fraud and carries with it a relatively short three-year statute of limitations (California Civil Code section 338(d).)

The cancellation provisions are found in Paragraphs 14C (1) and (2), and in Paragraph 14E of the CA-RPA. Regardless of the reason, the seller must give some type of notice to the buyer, however (either a Notice to Perform or a Demand to Close Escrow) before the seller can cancel.