An Appraisal Is the Bank's Insurance Policy
The main purpose of a home appraisal is to assure the mortgage lender that the home is worth the asking price. Banks and other mortgage lenders are taking a big risk when they loan hundreds of thousands of dollars to a buyer. If the buyer defaults on the loan, the lender's only recourse is to foreclose on the home and try to sell it. If the home isn't worth as much as the loan, the bank will never get its money back.
That's why the buyer typically pays for the home appraisal, which costs between $300 and $400 for a single-family home. The bank or mortgage lender generally has a stable of appraisers who it trusts to come up with an accurate appraisal.
If the appraisal comes back equal to or higher than the asking price, then the sale can move forward, but if it comes back low, that could be a problem. The bank is highly unlikely to approve a mortgage that's above the appraised value, which is bad news for the seller, who may have to lower the asking price.