Well your agent should be able to best answer this, since part of it pertains to state regulations. if you have a real estate attorney then DEFINITELY ask him.
What I think the situation is, is that you can't close unless something is adjusted. Your bank will refuse the loan since the home doesn't appraise. So something needs to give unless you want to walk away (you can - your contract will have a thing in it called appraisal contingency for your financing.
But if everyone wants this to happen then a mixture of stuff can occur. You can kick in more, The seller can come down - the agents can reduce their commissions (I highly recommend leveraging this - they won't want to "lose this deal" and will be more disposed to adjusting now or losing everything).
Since the market out there may well still be falling, this can be very good leverage for you to get the seller to drop their drawers another $10K - or you will WALK. If you want to play hard ball, it's a good time for it.
But ... your question appears rhetorical at the moment ... so wait and see ...!!! Good luck!... more