One of my team members was on vacation and his client informed the lender that he was switching lenders less than three weeks before closing, to get a lower interest rate. This created a huge problem with the seller and the listing agent, as it could have delayed the closing.

I contacted the buyer and pointed out the clause in the purchase agreement that states the buyer must make application for the loan within five business days after the acceptance date of the purchase agreement. I also explained that when the purchase agreement was presented to the listing agent and seller, the buyer’s pre-approval letter was included, and the listing agent contacted the lender to verify the approval, before the seller accepted the purchase agreement. 

It can take about four weeks to get a loan approved, and in this case the appraisal was complete, and the buyer’s loan was already approved. The listing agent made a routine follow up call to confirm the file was on track for closing and the lender informed the agent of the buyer’s intention to switch lenders. The listing agent was furious as now there was no pre-approval letter, there would need to be a new loan application, appraisal and the sale wouldn’t close by the date in the contract.

Once the buyer understood the contract and the process, he agreed to continue with the original lender. The reason the buyer was quoted a better rate was because the interest rates dropped the day before. I informed the buyer that the original lender had a “slide rule” whereby they match rate reductions within two weeks of closing, so the buyer could benefit from the lower rate with the original lender.

Had the seller agreed to the closing date extension for the buyer to switch lenders, the buyer may have been obligated to pay a second set of fees to the new lender, like a credit check or appraisal fee, which could have eliminated some or all of the savings the buyer expected, by switching.

It is important for buyers to compare lenders and loan costs, but it must be done within 5 business days of the acceptance of the purchase agreement. There is no guarantee a seller will agree to amend the purchase agreement to extend the closing date for a buyer to switch lenders.

A purchase agreement is a legally binding document, so it is important to consult your real estate agent or attorney before making any changes once it has been executed. 

Ask the Real Estate Agent is a weekly column by Cheryl Kempenich of Coldwell Banker Realty, who lives and offices in the Chisago Lakes Area. Submit your questions to All information is deemed reliable but not guaranteed. For legal assistance consult an attorney.