What is overage?

Overage refers to an amount of money earned on a property transaction that is paid to the seller after the sale has completed and all costs associated with the sale have been deducted. This can occur when there is a discrepancy between the original sale price of the property and the final sale price, or when certain sales thresholds are met.

For example, if a property is sold for $500,000, but the original asking price was $480,000, and the seller agreed to a 10% overage clause in the contract, then the seller would receive an additional $2,000 ($20,000 from the 10% overage) after the sale is complete.

Overage agreements are typically included in contracts for high-value properties, development land, or properties with a higher likelihood of increasing in value. They are designed to protect the seller's interests in the long term, especially if the property ends up being more valuable in the future. Overage clauses can be complex and should be reviewed by a legal professional to ensure they are fair and in line with local laws.