A home appraisal is an independent, licensed professional's estimate of a property's market value. Lenders require one before approving a mortgage to confirm the home is worth at least as much as the loan amount. It typically costs $300–$600.
A home appraisal is a formal, third-party estimate of a property's fair market value performed by a state-licensed or certified appraiser. Your mortgage lender orders one — and you typically pay for it — to make sure the home is worth at least as much as the loan they're extending. If the appraised value comes in below the purchase price, you'll need to renegotiate, make up the difference in cash, or walk away. The CFPB explains the appraisal process as part of its homebuying guide.
The appraiser visits the home, inspects its condition, size, features, and location, and then compares it against recent sales of similar nearby properties (called "comparables" or "comps"). The result is a written appraisal report delivered to the lender, usually within 1–2 weeks of the visit. As the borrower, you have the right to receive a copy of the appraisal at least 3 business days before closing, under the Equal Credit Opportunity Act valuations rule.
A low appraisal — where the appraised value is below the agreed purchase price — creates a gap. Lenders will only finance up to the appraised value. Your options: (1) renegotiate the purchase price down to the appraised value, (2) pay the difference out of pocket, (3) request a reconsideration of value (ROV) from the lender if you believe the appraiser missed comparable sales, or (4) walk away if your contract includes an appraisal contingency. HUD's homebuying resources cover appraisal standards.
These are frequently confused. An appraisal establishes value for the lender. A home inspection identifies physical defects (roof, foundation, HVAC, plumbing) for the buyer. They are conducted by different professionals, serve different purposes, and are both typically part of a home purchase — but neither substitutes for the other.