The lender will not lend more than what the appraisal came in at, so someone has to make up the difference somehow. The easiest way is for Mr Builder to reduce the sales price to the amount of the appraisal. Another option is for you both to eat some and split it or come up with a price agreeable to you both. The builder could drop some and you could pay more down.
I just hope you did not give the builder the $8000.
Read your purchase contract. In CA, our contracts have an appraisal contingency. If the property doesn't appraise and the contingency has not been removed in writing, the buyer can cancel contract without being in breach of contract - and they will get their ernest money deposit back. However, I'm not sure of the laws in your area so you may want to consult an attorney.