Appraisal value less that agreed price - good for me, no?

[Jeremy Trier]

Hi all,

I'm currently under contract buying a MF in Pawtucket. After negotiations we agreed on $404K, I was kicking myself for going above $400 when I thought it was worth $389 but it meet the 1% rule and my realtor said it would take this much.  Original asking price was $439.  This is my first time.

Well the appraisal came back and it was valued at $387... Since we have to buy this through FHA my loan stops at $387. Everyone I talk to says this is really in my favor but the seller is really pushing back and in my opinion my realtor is letting him. The seller said he would come down a little but is taking away several concessions too (fixing old windows, etc). What I'd like to do is tell the seller he needs to keep all agreements in place and come down or we walk, my realtor advises against that but I think he's just trying to close to get his commission. The appraised value is stuck on this house for the next 6 months so unless the seller finds a cash buyer or someone with a better down payment no one would buy the house for more than the $387. As far as I know no one else put in an offer.

I plan on living there and my wife really loves this house, but we are willing to walk if we have to.  It woiuld be hard, but we're willing.

Looking for experience, opinions and advice.

Thank you in advance,

Jeremy