Are you using a realtor or a lawyer now?
And, are you financing the house?  I don't think any mortgage company is going to finance you for more than the house is worth, I assume that's why they're trying to make you come up with the $7500 up front.
I'd walk away, and tell them to shove the deal up their asses.  Either that or sell me the house for the appraised value.  There may be a clause in your contract that's fucking you right now, but they'll never sue.
They're also not going to find any other rube after you who's going to pay $7500 over the appraised value either.

You should have put a contingency into the contract, in regards to the appraisal.
If you want the house, however, you should be able to surmount this little problem.
The "appraisal" is just an opinion based on the market, the house and the area.
If YOU really like the house, then it's worht it.

Were there other offers?

By the way, your offer should have said:
"$135,000 or appraised value"
or something to the effect that if it appraised for less then your offer the deal was off.
I don't like lawyers and realtors, but if you're not using one you really have alot of work to do.  I recently sold a house with no realtor and I did fine, but I also threatened virtually everyone involved with bodily harm if they tried to fuck me.

The realtor SHOULD have a contingincy built in, otherwise just have your financing "fall thu" and the deal is void. Also ask the realtor about the "pending inspection clause".

OK, couple of things
-You should have threatened your realtor.  I find that these people typically respond best to threats of physical violence.  If he thought you were going to hurt him, he never would have done what he did.  Remember, your realtor's cut comes out of the price of the house, which means that it's in your own realtor's best interests to drive up the price.  Also, if the deal falls through, he gets shit, so he's going to do whatever he can to make sure it goes through, and as quickly as possible.  He does not have your best interests at heart.  The game is stacked for him to be on the seller's side.  I could go on and on just on this point alone.
-"Seller contributions" are bullshit.  It's just allowing you to finance the closing costs.  That $4500 that they're "giving" you is going to cost you 5 times that at least over the life of your loan.  If you're not going to have to come up with $13000, then I don't see the benefit of it.
-Screwed is as screwed does.  If you really want this particular house right now, the you'll pay whatever you have to and put the added $7500  on credit cards.  Personally, I'd walk away from this and tell all these crooks and theives to sod off, but that's just me.  I never go into any deal that I'm not willing to walk away from.  Nothing is worth me getting screwed.

Yes, your offer should also have said something to the effect of "pending buyer financing".  The new price makes you unable to finance it.
If this, and the other clause, aren't in your offer, I'd beat your realtor's ass.  If you don't want to do it, give me his name and number and I'll do it.

One last thing, hahaha.
Is this what you're selling your Duc for?  Say it ain't so!

Will the bank give you a mortgage commitment based upon the appraisal? If they don't you should have an "out" based upon a standard mortgage contingency clause.

Mike

Negotiate the price down or walk away.
Let the financing fall through.
Get a realtor that knows what he's doing , he should have given you all available options to choose from.
Sue your realtor if he locked you into a BS contract.

If your mortgage si an FHA, they WILL NOT lend any more money than the appraised value. This is your easiest out. IM me for more info/advice.

BTW, I am a mortgage broker.

All contracts are contingent on financing. If yours is not, sue the realtor. You are prolly getting your just deserts for using one in the first place......

Who is "your" agent representing? You or the seller? Did they disclose their fiduciary relationship up front? If they're representing you and didn't have an appraisal contingency in the contract, tell them to eat their commission to make up the difference, or you'll walk on the deal and sue..... in addition to filing a complaint with the DBPR or whatever the agency is in Ohio.

Just about every real estate sales contract I have ever been involved in (3 buys/2 sells so far) has a clause that states the sale is contingent on you obtaining satisfactory financing.  

If the bank will not negotiate financing that will allow you to purchase the house without an additional down payment, you should walk away or re-negotiate DOWN from the appraised price.

Walk away.  If the leaches try to prevent it through threats, see a lawyer.  Paying  more than appraisal makes no sense.  You will be upside down the second you sign.  Find another house and avoid real estate agents like the clapp!

Good grief. What a poor financial decision.

Wrong..wrong...wrong. Both agents represent the seller. Both agents get paid by the seller. The agent thats working with you doesn't give a damn if you can afford it or whether it is a piece of sh$t. He/She only cares that you buy it and they get their commission. REMEMBER THIS!

And be wary if your agent comes back with some creative ways to circumvent this problem. He only wants you to sign the papers and doesn't care what legal/financial trouble he may put you in.

(I'm not a RE agent...however my parents worked in the business (not agents) for years).

If you were in Michigan I would tell you to come in in, but matters such as these are governed by a mix of contract phrases, state written law and state caselaw.
You need to talk to an Ohio residential real estate lawyer, he is the only one that will know.

This is [b]EXACTLY[/b] why at this very moment I have an agent working for [b]ME[/b] for a flat fee of $500.
This agent works for me and only me as far as this deal is concerned. Thats all she will get no matter how much the house sells for.

Edited to add I am the buyer.

Keep in mind, the money that will be the seller's after closing is yours now.  Here's an example:
A house is sold with a realtor representing the seller, and another representing the buyer.  It sells for $200k.  That means that at closing, each realtor gets 3% or $6k, so $12k total.  However, this 12k is coming out of YOUR MORTGAGE.  Which means that this $12k is going to in fact be something like $23k over the life of the loan.
So, instead you cruise the classified ads, and look for people that aren't represented by a realtor.  and you don't bother getting one either.  You instead cough up $1k to a lawyer to read over the contract (if you're in Florida, there's a standard form contract that all realtors use, I don't know about other states, so you can even skip the lawyer).  Now you make an offer of $188k instead, since the realtor's fees are cut out of the loop.  At $200k you'd be paying $1073 a month (not including tax & insurance).  At $188k you're paying $1010 a month.  Over the life of the loan, this saves you a total of $23k.  Invest that $63/month in something else and have a nice retirement. Or spend it on ammo every month, or just save it and look at it and know that you relied on yourself instead of some scumbag realtor (present company and ARFCOMMERS excluded of course).

You are WRONG WRONG WRONG.

The agent owes you Fiduciary rights since he/she works for you.  If they figure out a way to get you this house you want they are doing you a favor.

How are they doing him a favor by getting him a house that is over priced?