Overwatering may cause fertilizers to penetrate below the root zone. This is not only a waste of water but a waste of fertilizer too, both of which translate into a waste of money. Also, this enhances the possibility that chemicals may penetrate groundwater.
Overwatering can cause runoff. Runoff occurs when the water falling on the soil exceeds the amount that can be absorbed at that time. This can lead to fertilizer runoff, erosion, loss of newly sown seed, and water dollars washing down the street. If the time it takes for you to put out 1 inch of water causes runoff, then divide that time in two and leave sometime in between. This is a good practice to follow on slopes where runoff obviously occurs more quickly.