$305k appraisal on $390k home. Where do we go from here?

We (the buyers) are under contract for a home for $390k.

For context, the home is solid, but very outdated. 50 years old, but nothing has been updated since (including carpeted bathrooms and original electrical panel). Half an acre of wooded property on a cul-de-sac, near an elementary school.

The listing price went from $479k -> $449k -> $419k. Our realtor pegged the very high price to it being an estate with the sellers living out-of-town and inflating the price out of emotion (and splitting the profits). It’s been on the market for 7 months with one other offer the seller didn’t entertain.

We were pre-approved for a mortgage well above our asking price. We were prepared to put 20% down and take advantage of our excellent credit scores.

The broker came back with news from their appraisal: the home was valued at $305k. We knew the home was overvalued, but didn’t think it was that overvalued.

We have the means to pay a bit more outside of the $305k mortgage, but not to the tune of $85k! The seller thinks the mortgage appraisal is a joke and refuses to budge.

We love the home. Our young kids love the home. I’m so disappointed. Do we any recourse here? We can refute the appraisal with an ROV, but from what I hear that’s a lost cause.

Do we try to get a mortgage elsewhere and hope the appraisal comes in higher? Cut our losses and miss out on our dream home?

Edit: Thank you all so much for the responses! Some clarifications:

  1. The seller isn’t willing to do their own appraisal.
  2. Our realtor is skeptical of some of the comps on the appraisal.
  3. The broker questioned it himself because he’d never seen that much of a delta in 40 years experience. He followed up with the appraisal company but they stood by it.
  4. The home is within our very small school district, which we’d rather not take our kids out of. Pickin’s are slim.

Edit 2 to also add:

  1. We are legally able to “walk away” with our hand money, luckily. I was just hoping to exhaust all options before that. Though agreed at some of you suggesting to remove the emotion :)

  2. We had an inspection. Ultimately, there were some minor items (to be expected with an outdated home), but nothing that would drive the value down that much lower. Maybe by $5-10k if the seller was willing to budge. This also included pest and radon.

  3. The realtor shared some comps that likely went into the original valuation. It still wouldn’t put the home at $415k, but it wasn’t near $305k either.