Are you the Buyer or the Seller?
If you are the Buyer, I would consider requesting a purchase price reduction. If you are still within your due diligence period you may be able to walk away. If you think the appraisal is off, maybe talk to your agent/lender about what options you have. If that number is correct, you may have to bring more money to the closing table. I would also look to see why the SF amount was so off.
If you are the Seller, maybe see if there is a way to contest the appraisal amount. If you think the SF is wrong, maybe measure to show the SF your agent advertised.
That's a hard situation. I just went through the same with a buyer. Everyone agreed the unit was about 850SF but the appraiser who knocked it down about 100SF. It wasn't enough to cause a huge price difference for the loan so we just went with it, but it was definitely a shock when we got the report.