As has been explained, the lender requires an appraisal to warrant the value of the property, as the lender will only lend on the lower of the appraised value or sales price. Just because you are buying a condo for a certain sales price doesn't mean it's worth that much on paper (which is what the lender is concerned with, whereas you appear to be OK with the sales price of the home regardless if an appraisal comes in lower or not).
I'm surprised your lender didn't inform you of this requirement and it's cost when they were explaining the process of buying a home while using a mortgage to you. $400 is fair price for a lender required appraisal in my opinion.
Keep in mind if the home appraises for less than the sales price, the lender will base your down payment requirement on the lower appraised value. This can create a difference that you need to come out of pocket with.
Say for example you are buying the condo for $300k and the down payment requirement for the program you are applying for is 10% ($30k), leaving you with needing to obtain a $270k loan amount.
However if the condo appraises for $295k, then 10% down on that is $29.5k, but it starts off using the $295k appraised value (lower of the two), so your loan amount is $265,500.
If the seller (condo developer or whoever you are buying it from) doesn't agree to reduce the sales price to $295k, then you will need to pay that difference, which is $5k, in addition to your $29.5k down payment that the lender requires.