An appraisal is an independent, professional estimate of a home's market value, performed by a licensed appraiser and ordered by your lender — its purpose is to confirm the property is worth at least what the lender is agreeing to finance. It's a separate step from the home inspection and answers a different question: an inspection asks "what condition is this home in?"; an appraisal asks "what is this home actually worth?"
The appraiser generally visits the property, evaluates its condition, size, and features, and compares it to recent sales of similar nearby homes — similar to the comps your agent used to help price your offer, but produced independently and specifically for the lender's records.
If the home appraises at or above your offer price, the process moves forward as expected. If it appraises below your offer price — sometimes called an appraisal gap — your lender generally won't finance more than the appraised value, which opens a negotiation: the seller may agree to lower the price, you may choose to cover the difference in cash, both sides may split the gap, or, if your contract includes an appraisal contingency, you may have the option to renegotiate or walk away.
Appraisal outcomes can feel disappointing if you were emotionally set on a home, but a low appraisal isn't a reflection on you as a buyer — it's the appraiser's independent read on the local market at that moment, which is exactly the safeguard it's designed to be, for both you and the lender.
Your loan officer and agent will guide you through next steps if an appraisal comes back low — this is a well-understood, fairly common situation in real estate, with established paths forward, not a dead end.