With all due respect to Bill, it's never that cut and dried. Technically you are out of contract: in reality and practically speaking, this happens all the time. Flexibility is usually tolerated in a contract because there are so many moving parts, we are dealing with complex issues and with peopleâ€™s lives.
It sounds like your agent has been actively communicating with the other side and is proactively working on this. It also sounds like the buyers have been communicating as well â€“ everyone appears to understand what the issue is and are apparently actively working on it. In the current market, although I donâ€™t agree with a buyer changing lenders in the middle of a contract, I certainly understand the desire to get a lower rate AND â€¦ it happens all the time.
If this were my transaction, Iâ€™d issue an addendum extending the contingency time periods. That way, the buyer has a bit more time to find another loan and the deal is technically still active. Since you donâ€™t have a backup offer, and donâ€™t want to â€œforceâ€ the buyer to perform because of the risk of losing them, an extension is the best way to go.