Why you need one: Your mortgage lender will require an appraisal (and hire its own appraiser) to make sure the value of the house you want to buy is worth at least as much as the sales price. The appraiser will consider, among other things, the quality of construction and comparable data from the sales of homes in the same neighborhood.
When the appraisal takes place: After the contract is signed.
When the appraised price is lower than the sales price: If the lender's appraiser deems the house worth less than the sales price you've negotiated with the seller, you need to renegotiate the contract with the seller. Either the seller will need to lower the price to satisfy the lender and hence, allow you to secure a mortgage. Or you can back out of the deal if you can't afford the home by paying for the difference between the appraised price and the sales price yourself.
If the appraised value comes in above the sales price, however, you needn't do anything but enjoy the fact that you got yourself a good deal.
Cost: Even though the lender orders the appraisal, you will have to pay for it. Typically appraisals run between $300 and $600 for a single-family home, depending where you live, said Donald Kelly, spokesman for the Appraisal Institute.