The Home Appraisal: What It Is and Why It Can Derail a Deal

A home appraisal is an independent professional assessment of a property's market value, ordered by your lender (and paid for by you) to confirm the home is actually worth what you've agreed to pay — since the home is the lender's collateral, not just your purchase.

If the appraisal comes in at or above your purchase price, financing typically proceeds as planned. If it comes in below, your lender will generally only finance based on the lower appraised value, not your purchase price — meaning you'd need to cover the difference with additional cash, renegotiate the price, or in some cases walk away, depending on your purchase agreement's conditions.

Appraisals matter more in fast-moving markets where offers can exceed recent comparable sales, and less in stable markets where the purchase price closely tracks recent sales data. A pre-purchase conversation with your lender or broker about appraisal risk is worth having before you make an aggressive offer.