Buying or selling a home in California involves a sequence of disclosures, contingencies, and closing steps that can feel overwhelming the first time through. This guide walks you through the California Residential Purchase Agreement, the mandatory seller disclosures (the Transfer Disclosure Statement and the Natural Hazard Disclosure), how escrow and title insurance protect you, the withholding rules that apply at closing — including federal FIRPTA and California's Form 593 — and the closing costs each side typically pays. The goal is to help you understand the process so you can ask better questions and avoid costly surprises.

This guide is general information, not legal advice. Each transaction is unique, and the dollars at stake are usually large. Before you sign a purchase agreement or close, consider consulting an attorney licensed by the State Bar of California.

The California Residential Purchase Agreement

Most California home sales use the standardized California Residential Purchase Agreement (RPA) published by the California Association of Realtors. The RPA is the binding contract: it states the price, the deposit, the financing terms, the closing date, what personal property is included, and the contingencies that let a buyer cancel without losing the deposit. Once both parties sign and the buyer's offer is accepted, the clock starts on every deadline in the contract, so read it carefully before signing. The deposit (earnest money) is delivered into escrow, not to the seller directly, and is credited toward the purchase price at closing.

Contingencies and how they protect the buyer

Contingencies are conditions that must be satisfied before the buyer is obligated to close. Common contingencies include:

  • Inspection contingency — lets the buyer hire inspectors and cancel or renegotiate if the property's condition is unacceptable.
  • Loan (financing) contingency — protects the buyer if a mortgage cannot be obtained on the expected terms.
  • Appraisal contingency — protects the buyer if the home appraises below the purchase price.
  • Disclosure and review contingency — gives the buyer time to review the TDS, NHD, HOA documents, and the preliminary title report.

The standard RPA sets default time periods to remove these contingencies. If the buyer does not remove a contingency in writing by the deadline, the seller may issue a notice to perform and ultimately cancel. Once contingencies are removed, the buyer's deposit is generally at risk if they walk away without cause.

Seller disclosures: TDS and NHD

California requires robust seller disclosure. Under Civil Code § 1102 et seq., a seller of one-to-four residential units must give the buyer a Transfer Disclosure Statement (TDS), on which the seller discloses known defects in the property — roof, plumbing, electrical, foundation, unpermitted additions, neighborhood nuisances, environmental hazards, and deaths on the property within three years. The seller's agent must also disclose what a reasonably competent visual inspection reveals. Separately, Civil Code § 1103 requires a Natural Hazard Disclosure (NHD) identifying whether the home lies in a mapped flood, fire, or seismic hazard zone. These disclosures are typically delivered within seven days of acceptance under the RPA. A seller who conceals a known material defect can face liability for nondisclosure or fraud, so accuracy matters.

Escrow and title insurance

California transactions close through a neutral escrow holder who safeguards the buyer's funds and the seller's deed, releasing each only when all conditions are met. The escrow holder coordinates payoffs of existing loans, prorates property taxes, collects signatures, and records the deed. Buyers and lenders also rely on title insurance. The title company issues a preliminary report listing existing liens, easements, and exceptions; the buyer reviews it during the title contingency. At closing, an owner's policy protects the buyer's equity against covered title defects that predate the policy, and a lender's policy protects the mortgage. Title insurance is a one-time premium and is among the most important protections in the deal.

FIRPTA and California real estate withholding (Form 593)

Two withholding regimes can apply at closing. FIRPTA (the federal Foreign Investment in Real Property Tax Act) requires the buyer to withhold a percentage of the sales price — generally 15% — when the seller is a foreign person, and remit it to the IRS as a prepayment of the seller's tax. There are reduced rates and exemptions, including for certain lower-priced homes the buyer will occupy.

Separately, California imposes its own withholding under the Revenue and Taxation Code. The default California real estate withholding is 3.33% of the sales price, withheld by the escrow holder and remitted to the Franchise Tax Board (FTB) as a prepayment of the seller's California income tax. This applies to sellers generally — residents and nonresidents alike — though full exemptions exist, most commonly when the property was the seller's principal residence. The withholding is reported on Form 593. A seller may elect an alternative calculation based on the actual gain rather than the flat 3.33% of price. Because the rules interact and the exemptions are technical, sellers should confirm their status with the escrow holder or a tax professional before closing.

California statutes and forms that govern the sale

Several authorities shape a California home sale. Civil Code § 1102 et seq. governs the Transfer Disclosure Statement; Civil Code § 1103 governs the Natural Hazard Disclosure; Civil Code § 2079.13 et seq. governs real estate agency disclosure and dual agency; and the California Revenue and Taxation Code, implemented through FTB Form 593, governs state real estate withholding. Federal FIRPTA withholding arises under the Internal Revenue Code. For HOA-governed properties, the Davis-Stirling Act (Civ. Code § 4000 et seq.) requires the seller to deliver association documents before close. Knowing which rule controls each step helps you spot when something has been skipped.

Step by step: a typical California home purchase

  1. Get pre-approved for a mortgage so you know your budget and can make a credible offer.
  2. Make an offer using the Residential Purchase Agreement, including price, deposit, and contingencies.
  3. Open escrow once the offer is accepted; deliver the earnest-money deposit into escrow.
  4. Receive and review disclosures — the TDS, NHD, preliminary title report, and (if applicable) HOA documents — usually within seven days.
  5. Conduct inspections and order an appraisal; negotiate repairs or credits if needed.
  6. Remove contingencies in writing as each condition is satisfied.
  7. Finalize the loan and review the closing disclosure detailing your costs.
  8. Sign closing documents, deposit the remaining funds, and let escrow handle withholding (Form 593) and payoffs.
  9. Record the deed with the county recorder and take possession per the contract.

Closing costs: who pays what

Closing costs are negotiable, but California has customary allocations. Buyers typically pay loan origination fees, the appraisal, the lender's title policy, and prepaid items such as homeowners insurance and property tax impounds. Sellers typically pay the real estate commissions, the owner's title policy in many counties, any loan payoffs, and the state withholding from their proceeds. Escrow fees and transfer taxes are often split, though local custom varies by county and city. Your escrow holder will provide an estimated settlement statement so you can see the full picture before you sign. Always review it line by line, and ask about any charge you do not understand.

Additional disclosures and inspections

Beyond the TDS and NHD, California sales involve a stack of other disclosures. Federal law requires a lead-based paint disclosure for homes built before 1978. Sellers must provide a Megan's Law notice about the public sex-offender database, disclose known environmental hazards through a consumer booklet, and, for many homes, provide information about water-conserving fixtures and smoke and carbon-monoxide detectors. If the property is in a homeowners association, the seller must deliver the association's governing documents, budget, reserve study, and a statement of any pending assessments or litigation under the Davis-Stirling Act. Buyers, for their part, almost always order a general home inspection and may add specialized inspections — pest (termite), roof, sewer line, foundation, pool, or chimney — during the inspection contingency. The cost of these inspections is modest compared with the price of the home, and they frequently surface issues that justify a price reduction, a repair credit, or, occasionally, cancellation.

How buyers and sellers hold title

How a buyer takes title is a decision with long-term consequences, and California's community property rules make it especially important for married couples. A married buyer can take title as community property, as community property with right of survivorship, or as a joint tenant with a spouse — each with different results at death, in divorce, and for capital-gains tax treatment. Unmarried co-buyers typically choose between joint tenancy (which carries a right of survivorship) and tenancy in common (each owns a transferable share). The vesting you choose appears on the deed and is hard to change later without potential tax or reassessment consequences, so confirm it before closing. Escrow will ask how you want to take title, and many buyers consult an attorney or tax adviser before answering. Sellers should likewise confirm that everyone on title signs the deed — a missing co-owner's signature can stall or unwind a closing.

Frequently asked questions

Can I back out after my offer is accepted?

It depends on your contingencies. While a contingency is still active, you can generally cancel and recover your deposit if the condition is not satisfied — for example, if the home fails inspection or you cannot get financing. Once you remove contingencies in writing, walking away usually puts your deposit at risk, and the seller may keep it as liquidated damages if the contract so provides.

Who pays the real estate withholding at closing?

The withholding comes out of the seller's proceeds. For California's 3.33% withholding, the escrow holder deducts it and remits it to the Franchise Tax Board on Form 593. For federal FIRPTA, the buyer is technically responsible for withholding from a foreign seller, but escrow usually handles the mechanics. Sellers who qualify for an exemption (such as the principal-residence exclusion) certify that on the form.

Is title insurance really necessary?

Lenders require it, and for buyers it is strongly advisable. A title search can miss recorded liens, forged deeds, undisclosed heirs, or boundary issues, and title insurance protects your equity against covered defects that existed before you bought. The premium is paid once at closing and lasts as long as you own the home.

What happens if the home appraises below my offer?

If you have an appraisal contingency, you can renegotiate the price, make up the difference in cash, or cancel and recover your deposit. Without that contingency, you may be obligated to close at the agreed price or risk losing your deposit, so think carefully before waiving appraisal protection in a competitive market.

How long does it take to close on a home in California?

A typical financed purchase takes roughly 30 to 45 days from accepted offer to recording, driven mostly by the lender's underwriting timeline and the contingency periods in the contract. All-cash purchases can close faster because there is no loan to underwrite. Delays commonly arise from appraisal issues, loan conditions, title problems, or HOA document delivery, so build some cushion into your moving plans.

Can a seller refuse to make repairs after the inspection?

Yes. California's disclosure laws require honesty, not repairs, and the standard purchase agreement is generally sold "as-is" with respect to disclosed and discoverable conditions. A buyer can request repairs or a credit during the inspection contingency, but the seller is free to decline. The buyer's leverage is the ability to cancel within the contingency period if the parties cannot agree.

What is an escrow holdback?

Occasionally the parties agree to close even though some work remains unfinished — a repair, a permit sign-off, or a pending payoff. An escrow holdback sets aside funds from the seller's proceeds to cover the obligation, released when the condition is met. Holdbacks should be documented carefully so both sides know exactly what triggers release of the funds.

Common pitfalls for buyers and sellers

Even with standardized forms and licensed professionals, California transactions go wrong in predictable ways. Sellers most often stumble by under-disclosing — failing to mention a leak, an unpermitted addition, or a recurring drainage problem — which can lead to a nondisclosure or fraud claim months after closing. Sellers also lose money by missing the withholding exemption they qualified for, or by signing a listing agreement without understanding the commission terms. Buyers most often stumble by waiving contingencies too aggressively in a competitive market, skimming the preliminary title report, or skipping specialized inspections to save a few hundred dollars on a home worth hundreds of thousands. Both sides get burned by vague contract terms about what personal property is included, who pays for repairs, and exactly when possession transfers. The cure for almost all of these is the same: slow down at the key moments, read the documents, ask questions, and get professional help — a home inspector, a tax adviser, or an attorney — before signing or waiving anything important.

After closing: recording, taxes, and possession

Closing is not quite the finish line. The escrow holder records the deed with the county recorder, which is the act that legally transfers ownership and establishes the buyer's priority against later claims. Within a short time the buyer will receive a supplemental property tax bill reflecting the reassessment to the new purchase price under Proposition 13 — a one-time catch-up bill that surprises many first-time buyers, so budget for it. The buyer should also confirm that the seller's old loans were paid off and that the reconveyance (the release of the prior deed of trust) is recorded. Possession usually transfers at close of escrow, but the purchase agreement controls; some deals allow the seller to stay briefly after closing under a rent-back arrangement, which should be documented in writing. Finally, keep your closing documents, title policy, and disclosures permanently — you will need them when you sell, refinance, or resolve any later dispute.

Talk to a California real estate attorney

Most California home sales close smoothly, but disputes over disclosures, contingencies, title, or withholding can be expensive. If your transaction is unusual or contested, a lawyer's review is worthwhile. For the bigger picture, see the real estate hero guide, and if you are facing trouble with a mortgage, read the California foreclosure process guide. Our directory lists attorneys licensed by the State Bar of California across all 58 counties — searching is free and carries no obligation.