If you used the standardized forms issued by the Cal. Assn. of Realtors, and followed the proper procedure for using them, and the buyer did in fact remove the financing contingency and then couldn't qualify, you are entitled to the deposit as liquidated damages, as long as it is 3% or less of the purchase price.  The buyer is obligated to sign the concellation and instruction to release the deposit from escrow.  If the buyer refuses, the cancellation is still effective (if done properly) and you can go ahead and sell to the back-up buyer, but you will have to take legal action to get the deposit from the original buyer released to you.  I have offices in Sacramento to assist clients in your area.  If you would like a free initial consultation, please give me a call.