What is a home appraisal? A licensed appraiser's written opinion of what a home is worth, ordered by the lender, not by you.
A home appraisal is an independent opinion of market value written by a state-licensed appraiser. On a financed purchase the lender orders it, the buyer usually pays for it, and its job is to protect the lender: it decides how much the house can secure, not how much you may love it.
The appraiser walks the home, measures it, notes condition and improvements, then prices it against recent nearby sales, adjusting each comparable for the differences. The result is a single number and the reasoning behind it. It is an opinion, formed to a professional standard, and it can be wrong.
The number matters most when it comes in under the contract price. A lender will lend against the appraised value, not the price, and the difference has to come from somewhere: the seller drops, the buyer pays cash over, the two split it, or the contract ends.
A worked example
A buyer under contract at $520,000 pays around $600 for the lender's appraisal. The appraiser finds three sales within a mile in the last six months, adjusts one down for its pool and one up for its smaller lot, and writes $505,000. The lender lends against $505,000.
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Questions people ask
Who pays for the home appraisal?
The buyer, in almost every financed purchase, usually as an up-front fee at the time it is ordered. The lender chooses the appraiser and the report belongs to the lender, though the buyer is entitled to a copy.
How is an appraisal different from a home inspection?
An appraisal is an opinion of value for the lender. An inspection is a report on condition for the buyer. An appraiser notes condition only where it affects value and will not tell you the water heater is at the end of its life.