I'm curious to know what happened on your contract.
When an appraisal comes in short, there are a few options:
1) Seller and/or buyer can concede the difference
2) Buyer can terminate the contract based on not being able to obtain financing (if within Third Party Financing Addendum terms)
3) Ask lender to challenge appraisal
I write into all contracts that the appraised value must be equal to or more than the agreed to sales price, or buyer can terminate contract and receive all earnest money back. It protects the buyer from the seller threat of keeping earnest money.
The good news is that if the appraisal came back low, it is in the best interest of the seller to negotiate too. If they try to put it back on the market, it will probably have the same issue with another buyer - if financed.
It sounds like you had an idea that this home was priced high.