At this point, lenders usually order an on‑site appraisal by a licensed appraiser.

A home appraisal and a home inspection aren't the same thing. A home inspector looks for defects in home components like plumbing, heating and air systems, and the foundation. Appraisals, on the other hand, focus on value and consider factors like age and condition of the home, location, size, structural improvements, features and amenities. Appraisers compare your home to similar recently sold homes nearby and share their findings with lender and buyer.

If the appraiser values the home at less than you paid for it, you'll have to increase your down payment or negotiate with the seller to reduce the price, since lenders won't loan more than a home is worth. If the sellers won't come down, but you have an appraisal contingency in your purchase and sales agreement, you can walk away from the deal and recover your earnest money.