If you signed the arbitration agreement on page 5 of your purchase agreement, then you will have to arbitrate. Usually though, you are supposed to go back to the negotiation table and try to work it out when an appraisal comes in lower. That's not that much of a difference really, of course, depending on the house, but you are allowed to have an appraisal review done if there is disagreement. They aren't going to be able to sell the home for a higher amount if that's what the appraisal came in at though. That's what it is always going to come in at for every buyer, unless there are comps that could support the higher price. Appraisers right now are being too liberal in appraising homes for far below what the market is actually doing, trying to keep up with the downward trend which I don't agree with if the most recent comps of the area justify a higher price.
However, maybe this was a sign that there is a MUCH BETTER home out there for you!!!! Try to stay positive!