Final answer:
A party is asked to bring more funds than needed to a legal closing to cover any unexpected expenses or adjustments. This is similar to how banks manage funds, ensuring the ability to meet demands and maintain transaction stability under the framework of fractional reserve banking.
Step-by-step explanation:
The reason a party is instructed to bring more funds than required to a legal closing is primarily to ensure that all unexpected expenses or adjustments can be covered.
Just as banks are subject to regulations and financial investments supervisions, a legal closing can involve last-minute changes in the required funds due to factors such as adjustments in prorated taxes, utility costs, or association fees. Furthermore, having additional funds helps to account for any potential errors in the initial estimations or unforeseen costs that may arise during the closing process.
While banks operate on the principle of fractional reserve banking, which allows them to lend out a majority of deposits and keep only a fraction on hand, the additional funds at a legal closing serve as a buffer to facilitate a smooth transaction.
This is necessary because, just like in the banking scenario, where bank supervisors might face political pressure not to disrupt operations, a smooth closing without financial hiccups is beneficial for all parties involved and contributes to the overall stability and trust in the transaction process.