Can a seller refuse to agree to close in escrow even if the buyer's lender caused the delay?

Yes. Closing in escrow or as a gap closing is a cooperative arrangement between the parties, not something a buyer can insist on or that a seller is required to agree to, even where the delay causing the request was clearly the buyer's lender's fault rather than the buyer's own. The seller is generally entitled to expect the transaction to close strictly according to the Agreement of Purchase and Sale.

That said, sellers sometimes agree to a short accommodation like this anyway, particularly where the underlying deal is otherwise sound, the delay is brief, and the buyer's lawyer can offer reasonable protections such as a holdback or clear undertakings. Whether a specific seller agrees often comes down to their own circumstances, such as whether they have their own purchase depending on this closing happening on time, and how much goodwill exists between the parties. If a seller refuses, the buyer's options narrow to either finding a way to close on the original date despite the lender's delay, or facing the consequences of not completing on time, including possible default.