Legal Question in Real Estate Law in California

If they are voluntarily giving it back, they need to sign a deed back to you which then needs to be recorded in the county recorder's office in the county where the property is located.

I would also suggest that you use a title company for the transfer and require them to pay for title insurance. Otherwise if they have any judgment liens, or other encumbrances that have attached, you will take it back subject to their debts. If the preliminary report shows anything, you can make them pay it off, or you are better off foreclosing, which would wipe out most liens that could have attached after you sold it to them.

I assume this was a conventional sale with legal title passing at the closing and that you carried back a promissory note secured by a first deed of trust. The phrase "sold a home on contract" could, but probably doesn't, imply something else, e.g. a land contract or contract for deed. If that were the case, the property would presumably still be in your name.

If the buyers are in default, or likely to default soon, you may have an election to foreclose rather than a voluntary unwinding of the sale. All things being equal, the voluntary deal may be preferable.

In electing to take the house back, follow Mr. McCormick's advice, to which I would add, have the physical condition of the property confirmed to see if there has been unreasonable neglect or serious damage, and check to see if the property taxes are current.

It might be a good precaution to have an attorney review the sale contract, the new title report, and draft a formal settlement agreement to rescind the sale contract, reconvey the deed of trust, release one another from claims, set firm dates for change of ownership and possession, and so forth. Ask for title insurance and make sure the hazard and liability coverages are continuous.