An appraisal is required by lenders before approving a mortgage to ensure the home is worth at least as much as the loan amount. A typical appraisal costs $400-$700 and is paid by the buyer.

The appraiser visits the property, measures it, notes its condition and features, and compares it to recent sales of similar nearby homes (called 'comparables' or 'comps').

If a home appraises for less than the agreed purchase price, the buyer must either bring extra cash to closing, renegotiate the price, or walk away — the lender will only loan against the appraised value.