What effect does an escrow overage have on closing costs for the buyer?

An escrow overage occurs when the amount deposited into escrow for costs such as property taxes or insurance exceeds what is actually needed to cover those expenses. Typically, any surplus funds in escrow are returned to the buyer after all the necessary payments have been made. This means that the buyer receives a refund of the excess amounts once the closing process is complete.

When the buyer receives this refund from the escrow overage, it decreases their overall financial burden associated with the closing of the property. This is why it is important to recognize that an escrow overage results in a positive financial aspect for the buyer, as they ultimately recover funds after the transaction is finalized. Understanding this concept helps buyers manage their expectations regarding closing costs and cash flow during the purchase of a property.