Another reason to escrow the money is so the mortgage company won't have any issues. Many limit the amount of credit you can receive at closing and since you already have closing costs credited, another credit might be disallowed. Ask your mortgage rep ahead of time to know for sure.
Congratulations on your new home!
If you are still in the inspection period you can ask for the insulation to be added at the sellerâ€™s expense. They can either say no or take care of it so they don't lose you as a buyer.
If that has passed see if you can raise the price of the home by $1,000 or more and have the money put towards the insulation. That way you don't have to pay for it out of pocket. Since the home appraised for $10,000 more then you paid the lender should be fine with it.